Introduction to AIFC AML/CFT

system

PREPARED BY DULAT AKKASSOV

ASSOCIATE
FINANCIAL CONDUCT DIVISION
Outline
➢Introduction: Global AML/CFT Network
➢AML/CFT Framework in AIFC
✓AIFC AML Rules
✓AML Guidance
➢AML/CFT legislation of Kazakhstan
✓AML/CFT Law
✓Key amendments to AML/CFT Law
✓Resolution of Government
✓Order of the Minister of Finance
➢Q&A
Global AML/CFT Network
➢ In 1989 an inter-governmental body the Financial Action Task Force (FATF) was established
and AML/CFT Global network has started its activities.
➢ FATF 40+9 Recommendations were issued in 1990 then revised in 1996, 2001, 2003 and
most recently in 2012. The last amendments into the FATF 40 Recommendations were
added in 2019.
➢ The Eurasian group on combating money laundering and financing of terrorism (EAG) is a
FATF-style regional body which assists member-states in implementing the FATF 40 anti-
money laundering Recommendations. Kazakhstan is a member-state of EAG.
➢ AIFC as a jurisdiction with a special legal regime implemented the requirements of FATF 40
Recommendations applicable to the relevant AIFC Participants.
➢ AFSA as a regulatory body monitors compliance with FATF requirements by the relevant
AIFC Participants and takes all necessary measures to improve the AML/CFT system in
AIFC.
➢ AFSA jointly with FIU will take part in the preparation process to the 2nd Round of EAG
Mutual Evaluation of Kazakhstan in 2021-2022.
 FATF documents on Risk-Based Approach
➢ Guidance for a Risk-Based Approach Guidance for Legal Professionals
➢ Risk-based Approach Guidance for the Securities Sector
➢ Risk-based Approach Guidance for the Life Insurance Sector
➢ Guidance for a Risk-Based Approach for Money or Value Transfer Services
➢ Guidance for a Risk-Based Approach to Virtual Currencies
➢ Risk-Based Approach for the Banking Sector
➢ Guidance for a Risk-Based Approach to Prepaid Cards, Mobile Payments and Internet-Based
Payment Services
➢ FATF Guidance on the Risk-Based Approach for Dealers in Precious Metals and Stones
➢ FATF Guidance on the Risk-Based Approach for Trust and Company Service Providers (TCSPs)
➢ FATF Guidance on the Risk-Based Approach for Accountants
➢ FATF Guidance on the Risk-Based Approach for Real Estate Agents
➢ FATF Guidance on the Risk-Based Approach to Combating Money Laundering and Terrorist
Financing - High Level Principles & Procedures
➢ Revised Guidance on AML/CFT and Financial Inclusion
AML/CFT Framework in AIFC
➢ AIFC Anti-Money Laundering and Counter-Terrorist Financing and Sanction Rules (AIFC
AML Rules)
➢ Guidance (Requirements) applicable to the Rules of Internal Control for the purposes of
counteracting the legalisation (laundering) of proceeds from crime and the financing of
terrorism for financial monitoring entities of the AIFC (AML Guidance)
➢ Concerning some issues related to counteracting legalisation (laundering) of proceeds
obtained through criminal means and financing of terrorism (Joint Order of AIFC Governor
and Ministry of Finance of RoK on AML issues)
➢ List of Predicate offences relating to Money Laundering and Terrorist Financing
➢ List of Typology research reports relating to the Money Laundering and Terrorist Financing
➢ AFSA Notice on the Requirements to the AML Training courses for the Relevant Persons
and Recognised AML Training Centres
➢ AFSA Notice on Class waiver and modification for the Representative Offices which include
a Non-application of the requirements of the AIFC AML Rules
AML/CFT Framework in AIFC
➢ The Features of AML/CFT Framework in AIFC:
✓AML/CFT framework applicable to the 27 Regulated Activities and 8 Market Activities
which cover – Capital Markets, Asset Management, Private Banking, Islamic Finance,
Financial Technologies and Trust activities
✓The simplified supervisory requirements for the Representative Offices – AIFC AML
Rules are not applicable to the Representative Offices
✓AML Guidance with minimum requirements of AML/CFT Law of Kazakhstan and AIFC
AML Rules applicable to all relevant AIFC Participants
✓AFSA may provide a temporary waiver or modification of one or more elements of
AIFC AML Rules in order to simplify the supervisory requirements on the initial stage
of AIFC Participant’s activities
AIFC AML Rules
• Purpose of AML Rules
✓The AML Rules have been designed to provide a single reference point for all
persons and entities (collectively called Relevant Persons) who are supervised by
the AFSA for AML, counter-terrorist financing ("CTF"), and sanctions compliance.
✓This means that they apply to Authorised Firms, Authorised Market Institutions,
Designated Non-Financial Businesses and Professions ("DNFBPs"), and Registered
Auditors.
DNFBP
The following class of persons whose business or profession is carried on in or from
the AIFC constitute Definition of designated non-financial business and professions:
• (a) A real estate developer or agency which carries out transactions with a
customer involving the buying or selling of real property;
• (b) A dealer in precious metals or precious stones;
• (c) A dealer in any saleable item of a price equal to or greater than USD 15,000;
• (d) A law firm, notary firm, or other independent legal business;
• (e) An accounting firm, audit firm, or insolvency firm; or
• (f) A Company service provider; or
• (g) A Single Family Office.
General requirements of AML Rules
Business Risk Assessment
• Obligation to conduct Business Risk
Assessment
• To adopt internal policies, controls
and procedures
Customer risk assessment
• Obligation to conduct Customer
Risk Assessment
• Identification of PEPs and BO
• Prohibition on relationships with
Shell Banks
Customer Due Diligence
• Identification and Verification
processes of CDD
• Enhanced Due Diligence
• Simplified Due Diligence
• On-going CDD
• Check sanction lists
Sanctions
• Sanctions systems and controls
• Notification obligation
AML Policies, controls and procedures
✓ Risk-based approach (customer and business
risks assessment)
✓ Customer Due Diligence (SDD, CDD, EDD)
including identification of PEPs, UBOs and
Shell Banks
✓ Reliance on the third party and Outsourcing
of CDD elements
✓ Correspondent banking and Wire transfers
(applicable for Authorised Persons only)
✓ Sanctions
✓ Money Laundering Reporting Officer (MLRO)
➢ Appointment of MLRO;
➢ Obligations to cooperate with AFSA, FIU and
relevant state authorities of RoK;
➢ Qualities of MLRO;
➢ Responsibilities of MLRO
➢ Outsourcing of MLRO functions***
➢ Reporting to AFSA and FIU;
➢ Training and Awareness;
➢ Groups, branches and subsidiaries***
➢ Record keeping;
➢ Data protection;
➢ Training records;
➢ Audit.
Recommendations of Financial Conduct Division
A Relevant Person must:
✓Gather information about every customer;
✓Analyse of received information;
✓Identify and assess the risks of ML/FT;
✓Understand the nature of ML/FT risks;
✓Establish the customer’s risk ratings;
✓Conduct ongoing monitoring of customers activities;
✓Regular review of business and customer risk ratings;
✓In case of changing of risk ratings, take adequate measures for managing and mitigating
risks (SDD, CDD, EDD);
✓Provide record keeping of all actions.
AML Guidance: Introduction
On May 21, 2020, AFSA approved AML Guidance as required by:
➢ paragraph 3-2 of Article 11 of the AML/CFT Law of Kazakhstan
➢ section 4.3.1 of the AIFC AML Rules
➢ paragraph 4 of the Joint Order between AIFC and Ministry of
Finance of RK on AML/CFT issues

✓ AML Guidance was adopted in order to implement the basic

requirements of the AML/CFT Law of Kazakhstan, thereby AML
Guidance covers the relevant aspects of FATF Recommendations
and AIFC AML Rules.
✓ The structure of AML Guidance is designed based on the template
approved by the Ministry of Finance of RK in compliance with the
requirements of the AML Law of Kazakhstan;
AML Guidance: Structure
❖ General Provisions
❖ The programme of organisation of internal control for AML/CFT
purposes
❖ ML/FT risk management programme
❖ Customer Identification Programme
❖ Programme for monitoring and analysing customer operations
❖ Training and education programme for employees of the Relevant
Person on AML/CFT issues
AML/CFT legislation of Kazakhstan
➢The Law of the Republic of Kazakhstan on Counteracting legalisation (laundering) of
proceeds obtained through criminal means and financing of terrorism (AML Law)
➢The Criminal Code of the Republic of Kazakhstan (Article 218 – ML, Article 258 - FT)
➢The Resolution of the Government of the Republic of Kazakhstan “On approval of the
Rules for the provision by reporting entities of data and information on transactions
subject to financial monitoring and the signs of determining a suspicious transaction”
➢The Order of the Minister of Finance “On approval of the List of documents required
for customer due diligence by entities of financial monitoring”
➢The Order of the Minister of Finance “On approval of the list of the offshore zones for
the purposes of the Law of the Republic of Kazakhstan on Counteracting legalization
(laundering) of proceeds obtained through criminal means and financing of terrorism”
➢The Order of the Minister of Finance “On approval of the requirements to financial
monitoring entities on training and education of employees”
AML/CFT Law of Kazakhstan
➢ In August 2009, the AML/CFT Law of Kazakhstan was adopted.
➢ From 2010 to 2020, in order to improve the legislation of Kazakhstan in the field
of AML/CFT, the relevant Law of Kazakhstan has updated 34 times.
➢ The amendments to the AML/CFT Law of Kazakhstan last made on May 13,
2020, and these amendments will come into a force on November 14, 2020.
➢ The amendments were adopted in the framework of the preparation process to
the 2nd round of EAG Mutual Evaluation of Kazakhstan in 2021-2022.
➢ AFSA identified around 50 new norms which will extend the existing norms and
relate to the relevant AIFC Participants subject to AML supervision according to
the AIFC AML Rules.
AML/CFT Law of Kazakhstan dated 28.08.2009, № 191-IV

➢ The Law on AML/CFT defines legal bases of anti-money laundering and

anti-terrorism financing, legal relations of subjects of financial monitoring,
authorized body and other state bodies of the Republic of Kazakhstan in
the sphere of AML/CFT.

➢ AML/CFT Law has the following directions:

✓List of Financial monitoring entities and their responsibilities;
✓Threshold transactions types and amounts;
✓General requirements for CDD including PEPs, BO and FFO;
✓Powers and responsibilities of FIU;
Key amendments related to AIFC Participants
✓ Expansion of the scope of regulated sectors to new categories of “financial monitoring entity”
(subparagraph 19) in paragraph 1 of Article 3).
It means that the appropriate requirements of the AML/CTF Law will apply to the relevant AIFC
Participants. Therefore, AFSA will adopt the list of relevant activities of the AIFC Participants for
the AML/CTF purposes in consultation with the Ministry of Finance of RK in compliance with the
FATF Recommendations.
✓ AFSA should revise the relevant activities for the purposes of the relevant Guidance
(Requirements) applicable to the Rules of Internal Control for AML/CTF purposes (paragraph
3-2 of Article 11).
This paragraph was amended, and AFSA will adopt the relevant amendments to the Guidance in
consultation with the Ministry of Finance of RK.
✓ AFSA should adopt the Requirements to Customer Due Diligence in cases when the AIFC
Participants establish the non-face to face business relations with its customers (paragraph 11
of Article 5).
The Requirements will be adopted by AFSA in consultation with the Ministry of Finance of RK.
Resolution of the Government &
Order of the Minister of Finance
➢ data and information on operations that are subject to financial
monitoring are documented and submitted by the financial monitoring
entities to the financial monitoring authority in the form approved by the
Resolution of the Government dated November 23, 2012 #1484.
➢ The Resolution of the Government determines the methods and
procedures of providing information and data.
➢ financial monitoring entities should conduct record keeping of its
customers on the basis of the list of documents required for due
diligence, approved by Order of the Minister of Finance dated
15.02.2010 № 56.
➢ The Order determines the list of documents required from individuals and
legal entities and their representatives.
Thank you for attention and
participation!

Dulat Akkassov
Associate, Financial Conduct Division
Regulatory Office
T: +7-707-501-49-49
d.akkassov@afsa.kz
supervision@afsa.kz

20