20 october 2009

Kazakhstan adopted AML&FT Law

Kazakhstan adopted AML&FT Law

Law of the Republic of Kazakhstan on Anti-money Laundering and Combating Financing of Terrorism No. 191-IV dated 28 August 2009 (the “Law”)   

On 17 June 2009 the Parliament of the Republic of Kazakhstan approved the Law on Anti-money Laundering and Combating Financing of Terrorism and the Law on Introduction of Amendments and Supplements to Certain Legislative Acts of the Republic of Kazakhstan on Matters of Anti-money Laundering and Combating Financing of Terrorism, which weresigned by the President of the Republic of Kazakhstan on 28 September 2009.  The Republic of Kazakhstan is one of the lastformer Soviet Union republics which promulgated theselegislative limits (after Russia, Georgia and Kyrgyzstan)..

Adoption of the aforementioned Laws is a further development of Kazakhstan’s participation in 2003 UN Convention against Corruption of 2003, UN International Convention for the Suppression of the Financing of Terrorism of 2000, UN Convention against Transnational Organized Crime and Shanghai Convention on Combating Terrorism and Separatism approved by the Shanghai Cooperation Organization in 2001.  The compliance of new laws with the provisions of the Constitution of the Republic of Kazakhstan has been confirmed by the Resolution of the Constitutional Council of the Republic of Kazakhstan (No. 5 dated 20 August 2009.

Key features of the new AML&FT Law and associated Law on Introduction of Amendments and Supplements to Certain Legislative Acts of the Republic of Kazakhstan:

- Obligatory identification of a client and a recipient of the funds as well as identification of an aim and subject of a transaction is to be implemented by the subjects of financial monitoring in respect of transactions exceeding the certain amount.

In the event of exceeding the relevant amount  that depends on the transaction type and minimally equals to 1,000,000 KZT, the subjects of financial monitoring (financial organizations, auditors, notaries, advocates, legal advisers, etc.) have to collect and record information on the person carrying out the transaction, recipient of the fundsas well as an aim and subject of the transaction.  If identification cannot be performed, the subject of financial monitoring has the right to refuse from conducting the transaction and establishingbusiness relations with the client.

- Obligation of the subjects of financial monitoring to report to the authorized state body about transactions  which are subject to financial monitoring and suspicious transactions (involving the funds that are gained unlawfully or are targeted to finance the terrorism).
In the process of client identification,  the subjects of financial monitoring have to documentally record information on the client, therewith they are further obligated to submit certain information to the authorized state body on financial monitoring.  Disclosure of the information shall not be treated as breach of banking or commercial secret  or security market secret, and, according to the Law, can be made upon the conducting of transaction, if the due identification has been performed. On the contrary, information on suspicious transaction has to be provided to the  authorized state body  usually prior to the transaction.

- Right of the authorized state body to suspend conducting of suspicious transaction for  the period of 3 days.

Upon the receipt of information in regards to  a suspicious transaction, the authorized state body  is entitled to decide within 24 hours whether conducting of the transaction shall be suspended for the period not exceeding 3 calendar days. If the transaction is connected with legalization of funds obtained illegally or financing of terrorism, the authorized state body has to submit relevantinformation to the law bodies within 5 hours

Suspension of a suspicious transaction cannot incur  the liability of the subjects of financial monitoringfor breaching obligations under relevant civil contracts with their clients.

- Possibility of suspension or termination of licenses is  granted to the financial organizations in case of breach of Kazakh AML/FT legislation.

According to the provisions of the Law on Introduction of Amendments and Supplements to Certain Legislative Acts of the Republic of Kazakhstan on Matters of Anti-money Laundering and Combating Financing of Terrorism, Agency of the Republic of Kazakhstan on Regulation and Supervision of Financial Market and Financial Organizations (the“FSA”) has the right to suspend for 6 months or terminate the validity of licenses held by a second-tier bank, pension fund, insurance company or professional participant of securities market in case of systematic violations of Kazakh AML/FT legislation (3 and more times within consecutive 12 months).  In case of recurrent breach by abank, insurance company or participant of securities market of the said requirements, or their involvement into transaction connected with legalization of illegally obtained funds or financing of terrorism , or in case of failure to eliminate the breaches that caused the suspension of license, the FSA may terminate the license for rendering of financial services of the mentioned entities.

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The AML&FT Law and the Law on Introduction of Amendments and Supplements to Certain Legislative Acts of the Republic of Kazakhstan on Matters of Anti-money Laundering and Combating Financing of Terrorism shall come into force 6 months after the date of their approval - 8 March 2010. At the stage of drafting  the Law it was expected that the Financial Monitoring Committee of the Kazakh Ministry of Finance would be designated as the authorized state body, however,such a body has not been determined so far.

GRATA Finance and Securities Team

Rashid Gaissin
Managing Partner
RGaissin@gratanet.com

Shaimerden Chikanayev
Director of Finance&Securities
SChikanayev@gratanet.com

Tel.: +7 727 2445777
Fax: +7 727 2445776