Mutual Evaluation Report. Anti-Money Laundering and Combating the Financing of Terrorism JUNE 2011 REPUBLIC OF KAZAKHSTAN Kazakhstan is a member of the Eurasian Group on combating money laundering and financing of terrorism (EAG). This evaluation was conducted by the EAG and was the discussed and adopted by the EAG Plenary in June 2011. ©2011 EAG. All rights reserved. No reproduction or translation of this publication may be made without prior written permission. Requests for permission to further disseminate, reproduce or translate all or part of this publication should be made to EAG ([email protected]). 2 2011 EAG 3 TABLE OF CONTENTS PREFACE – INFORMATION AND METHODOLOGY USED FOR THE EVALUATION OF THE REPUBLIC OF KAZAKHSTAN ............................................................................................. 6 EXECUTIVE SUMMARY ............................................................................................................... 7 1. Background ................................................................................................................................ 7 2. Legal System and Related Institutional Measures ..................................................................... 8 3. Preventive Measures – Financial Institutions .......................................................................... 10 4. Preventive Measures – Designated Non-Financial Businesses and Professions ..................... 13 5. Legal Entities and Arrangements and Non-Profit Organizations ............................................ 13 6. National and International Cooperation .................................................................................. 14 1. GENERAL .................................................................................................................................. 16 1.1. General Information on Kazakhstan ..................................................................................... 16 1.2. General Situation with Money Laundering and Financing of Terrorism ............................. 19 1.3. Overview of Financial Sector and DNFBP .......................................................................... 21 1.4. Overview of Commercial Laws and Mechanisms Governing Legal Entities and Arrangements............................................................................................................................... 28 1.5. Overview of Strategy to Prevent Money Laundering and Financing of Terrorism.............. 31 2. LEGAL SYSTEM AND RELATED INSTITUTIONAL MEASURES ..................................... 41 2.1. Criminalization of Money Laundering (R.1 & 2)................................................................. 41 2.2. Criminalization of Financing of Terrorism (SR.II) .............................................................. 53 2.3. Confiscation, Freezing and Seizing of Proceeds of Crime (R.3) ......................................... 59 2.4. Freezing of Funds Used for Financing of Terrorism (SR. III) ............................................. 66 2.5. The Financial Intelligence Unit and its Functions (R.26, 30 and 32) ................................... 70 2.6. Law Enforcement, Prosecution and Other Competent Authorities – the Framework for Investigation and Prosecution of Offences as well as for Confiscation and Freezing (R.27, 28, 30 and 32) .................................................................................................................................... 77 2.7. Cross-Border Declaration and Disclosure (SR.IX) .............................................................. 85 3. PREVENTIVE MEASURES – FINANCIAL INSTITUTIONS ................................................ 90 3.1. Risk of Money Laundering and Terrorist Financing ............................................................ 90 3.2. Customer Due Diligence Including Enhanced or Reduced Measures (R.5 - 8) ................... 90 3.3. Third Parties and Introduced Business (R.9) ...................................................................... 103 3.4. Financial Institution Secrecy or Confidentiality (R.4) ....................................................... 104 3.5. Record Keeping and Wire Transfer Rules (R.10 & SR.VII) .............................................. 108 3.6. Monitoring of Transactions and Relationships (R.11 & 21) .............................................. 116 3.7. Suspicious Transaction and Other Reporting (R.13-14, 19, 25 & СР.IV) ......................... 117 3.8. Internal Control, Compliance, Audit and Foreign Branches (R. 15 & 22)......................... 125 3.9. Shell Banks (R.18) .............................................................................................................. 133 3.10. The Supervisory and Oversight System – Competent Authorities and SROs. Role, Functions, Duties and Powers (Including Sanctions) (R.23, 29, 17 & 25) ............................... 134 3.11. Money or Asset Transfer Services (SR. VI) ..................................................................... 163 4. PREVENTIVE MEASURES – DESIGNATED NON-FINANCIAL BUSINESSES AND PROFESSIONS ............................................................................................................................. 166 4.1. Customer Due Diligence and Record-Keeping (R.12) ....................................................... 166 4.2. Suspicious Transaction Reporting (R.16) ........................................................................... 168 4.3. Regulation, Supervision and Monitoring (R.24-25) ........................................................... 170 4.4. Other Non-Financial Businesses and Professions. Modern Secure Transaction Techniques (R.20) ......................................................................................................................................... 175 5. LEGAL ENTITIES AND FORMATIONS, NON-PROFIT ORGANIZATIONS ................... 177 5.1. Legal Entities - Access to information on beneficial owners and control (R.33) .............. 177 4 5.2. Legal Formations - Access to information on beneficial owners and control (R.34) ........ 178 5.3. Non-Profit Organizations (SR.VIII) ................................................................................... 179 6. NATIONAL AND INTERNATIONAL COOPERATION ...................................................... 181 6.1. National Cooperation and Coordination (R. 31) ................................................................ 181 6.2. Conventions and UN Special Resolutions (R.35 and SR.I) ............................................... 182 6.3. Mutual Legal Assistance (R.36-38, SR.V) ......................................................................... 184 6.4. Extradition (R.37, 39 и SR.V) ............................................................................................ 189 6.5. Other Forms of International Cooperation (R.40 and SR.V) ............................................. 191 7. OTHER ISSUES ....................................................................................................................... 195 7.1. Resources and Statistics (R.30 and 32) .............................................................................. 195 7.2. Other Relevant AML/CFT Measures or Issues .................................................................. 195 7.3. General Framework of the AML / CFT System (see also Section 1.1) ............................. 196 TABLES ........................................................................................................................................ 197 Table 1. Ratings of Compliance with FATF Recommendations .............................................. 197 Table 2. Recommended Action Plan to Improve the AML/CFT System ................................. 218 Table 3. Authorities' Response to the Evaluation (if necessary) ............................................... 234 ANNEXES .................................................................................................................................... 235 Annex 1. List of Abbreviations ................................................................................................. 235 Annex 2. Organizations Met during the On-Site Mission ......................................................... 238 Annex 3. Key Laws, Regulations and other Documents ........................................................... 240 Statute ........................................................................................................................................... 252 Annex 4. List of Key Laws, Regulations and other Materials Provided to Evaluation Team .. 255 Annex 5 ..................................................................................................................................... 262 Annex 6 ..................................................................................................................................... 264 Annex 6 ..................................................................................................................................... 264 5 PREFACE – INFORMATION AND METHODOLOGY USED FOR THE EVALUATION OF THE REPUBLIC OF KAZAKHSTAN 1 1. The evaluation of the anti-money laundering (AML) and combating the financing of terrorism (CFT) regime of the Republic of Kazakhstan is based on the Forty Recommendations of 2003 and Nine Special Recommendations on Terrorist Financing of 2001 of the Financial Action Task Force (FATF) and was prepared using the AML/CFT Methodology of 20042