March 25, 2022

AML/CFT/FPWMD system in Uzbekistan

1. Normative-legal acts

2. The concept of AML/CFT/FPWMD in Uzbekistan

3. Internal AML/CFT/FPWMD control

4. Suspension of operations and (or) freezing of funds or other property AML/CFT/FPWMD

5. Monitoring the validity of currency transactions by legal entities and individuals

6. Further development of the AML/CFT/FPWMD system

Normative-legal acts

  1. The International Convention for the Suppression of Financing of Terrorism, New York dd. 09.12.1999, ratified by Resolution of the Oliy Majlis of the Republic of Uzbekistan No. 225-II from 12.05.2001;
  2. Convention against transnational organized crime, New York dd. 15.11.2000, ratified by Resolution of the Oliy Majlis of the Republic of Uzbekistan No. 536-II from 30.08.2003;
  3. Law of the Republic of Uzbekistan No. ZRU-582 dd. 11.11.2019 “On the Central Bank of the Republic of Uzbekistan”;
  4. Law of the Republic of Uzbekistan No. 660-II dd. 26.08.2004 “On countering the legalization of proceeds from criminal activity, the financing of terrorism and the financing of the proliferation of weapons of mass destruction”;
  5. Decree of the President of the Republic of Uzbekistan No. UP-6252 dd. 06.28.2021 “On approval of the strategy for the development of the national system of the Republic of Uzbekistan for countering the legalization of proceeds from criminal activity, the financing of terrorism and the financing of the proliferation of weapons of mass destruction”;
  6. Decree of the President of the Republic of Uzbekistan No. UP-5446 dd. 23.05.2018 “On measures to radically improve the efficiency of the use of budgetary funds and improve mechanisms for combating economic crimes”;
  7. Resolution of the Cabinet of Ministers of the Republic of Uzbekistan No. 402 dd. 06.29.2021 “On additional measures to implement the Law of the Republic of Uzbekistan No. 402 dd. 06.29.2021 “On countering the legalization of proceeds from criminal activity, financing of terrorism and financing the proliferation of weapons of mass destruction”;
  8. Resolution of the Prosecutor General of the Republic of Uzbekistan No. 3327 dd. 19.10.2021 “On Approval of the Regulations on the Procedure for Suspending Operations, Freezing Funds or Other Property, Granting Access to Frozen Property and Resuming Operations of Persons Included in the List of Persons Participating or Suspected of Participating in Terrorist Activities or the Proliferation of weapons of mass destruction”;
  9. Resolution of the State Tax Committee No. 2013-7, SCC No. 01-02.19-22 and the Board of the Central Bank No. 7.4, reg. MJ No. 2467 dd. 12.06.2013 “On approval of the Regulations on the Procedure for Monitoring the Validity of Foreign Exchange Transactions by Legal Entities and Individuals”.

The concept of AML/CFT/FPWMD in Uzbekistan

In Uzbekistan, there are the following measures to counteract the legalization of proceeds from criminal activity, the financing of terrorism, and the financing of the proliferation of weapons of mass destruction (hereinafter referred to as “AML/CFT/FPWMD“):

  • control carried out by a specially authorized state body;
  • internal control;
  • customer due diligence measures;
  • measures to identify, assess and mitigate risks.

The AML/CFT/FPWMD measures apply to:

  • citizens of the Republic of Uzbekistan;
  • foreign citizens and stateless persons;
  • legal entities, their branches, and representative offices that carry out transactions with cash or other property on the territory of the Republic of Uzbekistan and abroad in accordance with international treaties of the Republic of Uzbekistan;
  • as well as to state bodies exercising control on the territory of the Republic of Uzbekistan over the conduct of transactions with cash or other property.

The Department for Combating Economic Crimes under the Prosecutor General’s Office of the Republic of Uzbekistan (hereinafter referred to as the “Department“) is a specially authorized state body on AML/CFT/FPWMD. The Department forms a list of persons involved or suspected of participating in terrorist activities or the proliferation of weapons of mass destruction (hereinafter referred to as the “List“). The list is formed on the basis of information provided by the competent authorities of the Republic of Uzbekistan (in this context are meant the National Security Service of the Republic of Uzbekistan, the Ministry of Internal Affairs of the Republic of Uzbekistan, the Prosecutor General’s Office and the State Committee for Industrial Safety of the Republic of Uzbekistan), as well as the information received through official channels from the competent authorities of foreign states and international organizations.

 

Internal AML/CT/FPWMD control

Internal control refers to the activities of organizations engaged in transactions with cash or other property (hereinafter referred to as “Organizations“) to identify transactions subject to reporting to a specially authorized state body. Such organizations are defined in Article 12 of the Law of the Republic of Uzbekistan No. 660-II of 26.08.2004 “On countering the legalization of proceeds from criminal activity, the financing of terrorism and the financing of the proliferation of weapons of mass destruction” (hereinafter – “ZRU 660-2“). There are special internal control rules for such organizations, for example:

  • for organizations engaged in the organization of lotteries;
  • for persons engaged in activities in the field of turnover of crypto assets;
  • for operators, postal service providers;
  • for real estate organizations;
  • for exchange members;
  • for professional participants of the securities market;
  • for insurers and insurance intermediaries;
  • for audit organizations;
  • for persons carrying out operations with precious metals and precious stones; and
  • in commercial banks;
  • in non-bank credit institutions;
  • in organizations providing leasing services;
  • in notary offices and law firms.

The mentioned rules also cover the procedure for taking measures for proper customer verification and for identifying, assessing, and reducing risks.

Suspension of operations and (or) freezing of funds or other property AML/CFT/FPWMD

If, in the course of internal control, transactions with cash or other property that are being carried out and being prepared are recognized as suspicious by Organizations, then they report such transactions to the Department. A suspicious transaction is an operation with money or other property that is in the process of preparation, commission, or has already been committed, in respect of which, in accordance with the criteria and signs established by the rules of internal control, suspicions have arisen about its implementation for the purpose of legalizing proceeds from criminal activity or financing terrorism or financing the proliferation of weapons of mass destruction.

At the same time, the Department and its employees are obliged to ensure the confidentiality and safety of the information that has become known to them, constituting commercial, banking, and other secrets. It should also be noted that employees of Organizations, Departments, and other bodies involved in countering the legalization of proceeds from criminal activities, the financing of terrorism, and the financing the proliferation of weapons of mass destruction are not entitled to inform legal entities and individuals about the control being carried out against them.

Organizations carrying out transactions with cash or other property, when conducting transactions, are required to verify their participants and beneficial owners of customers with the List, as well as on a regular basis (with each update of the List, but at least once every three months) to monitor the existing database of customers and their beneficial owners, in order to identify funds or other assets of persons subject to suspension. There are also a number of other grounds for suspending operations and freezing funds or other property.

Monitoring the validity of currency transactions by legal entities and individuals

Branches of commercial banks submit to the relevant territorial state tax administrations or the Interregional State Tax Inspectorate for Large taxpayers, as well as to the parent commercial bank information on currency transactions conducted by clients having any of the following characteristics:

  • under the agreement (contract), funds were transferred for the import of goods (works, services) in favor of non-residents registered in states or territories that provide preferential tax treatment and (or) do not provide for disclosure and provision of information during financial transactions (offshore zones), as well as to non-residents’ accounts in banks located in offshore zones. The list of offshore zones can be found here;
  • payment by residents to non-resident counterparties of a fine for non-fulfillment of obligations and non-compliance with delivery or payment deadlines stipulated by export-import contracts;
  • payment of import contracts for the performance of works or services, royalties, as well as the transfer of dividends to foreign founders or the repatriation of profits;
  • payment by a resident under a loan agreement (loan agreement) in favor of a non-resident (with the exception of loans (loans) issued by international financial institutions and foreign banks);
  • other characteristics.

The bodies of the State tax service monitor the information received from commercial banks and the bodies of the state customs service. The State tax service bodies, in case of detection as a result of monitoring of questionable transactions related to the unjustified transfer of funds abroad or with overstatement (understatement) of the cost of goods during customs clearance, have the right to request additional information on these transactions from commercial banks and customs authorities.

In the process of monitoring, legal impact measures are not applied and the activities of an economic entity are not suspended. When cases related to the legalization of criminal proceeds, the financing of terrorism and the financing of the proliferation of weapons of mass destruction are identified by the results of monitoring, the State tax service bodies notify the Department for Combating Economic Crimes under the Prosecutor General’s Office of the Republic of Uzbekistan in writing within three days.

The Central Bank of the Republic of Uzbekistan also monitors and monitors compliance by organizations licensed by the Central Bank, as well as pawnshops and mortgage refinancing organizations with the rules of internal control and the procedure for providing information related to countering the legalization of proceeds from criminal activity, financing of terrorism and financing the proliferation of weapons of mass destruction to a specially authorized state body.

Further development of the AML/CFT/FPWMD system

The Strategy for the development of the national AML/CFT/FPWMD system of the Republic of Uzbekistan, approved by Decree of the President of the Republic of Uzbekistan No. UP-6252 dd. 06.28.2021 (hereinafter referred to as the “Strategy“), provides for the need to bring the national AML/CFT/FPWMD system in line with the standards of the Group for the Development of Financial Measures to Combat Money Laundering (hereinafter referred to as the FATF), as well as international documents.

The priority areas of the Strategy aimed at improving the national AML/CFT/FPWMD system are also:

  • minimization of risks identified at the national level in the field of countering the legalization of proceeds from criminal activities, the financing of terrorism and the financing of the proliferation of weapons of mass destruction, and further strengthening of state policy;
  • further improving the effectiveness of the activities of state bodies for the early prevention of crimes in this area, strengthening the responsibility of organizations engaged in transactions with cash or other property;
  • further development of cooperation and establishment of a systematic dialogue with international organizations and foreign states;
  • the widespread introduction of modern information technologies in the formation of a unified system of all statistical data in the field, collection, processing, analysis of data and their use, as well as improving the efficiency of data exchange;
  • professional development of employees of state bodies involved in this field, as well as training and retraining of employees of organizations engaged in transactions with cash or other property.

It is envisaged to achieve the following results within the framework of the Strategy:

  • the implementation of international standards in the field of countering the legalization of proceeds from criminal activity, the financing of terrorism, and the financing of the proliferation of weapons of mass destruction will be ensured in legislation and law enforcement practice, as well as the national system, will be improved;
  • shortcomings in legislative acts within the framework of the fulfillment of international obligations in this area will be eliminated, as well as the effectiveness of the implementation of recommendations of international organizations will be improved;
  • further strengthening of the national system will be achieved, as well as the stability of the financial sector will be ensured;
  • the republic’s indicators in international ratings and indices will be improved.