Armenia

Armenia is not a major financial center. Armenia has no offshore banks and few non-banking financial institutions. Nevertheless, high unemployment, low salaries, corruption, a large shadow economy, and the presence of organized crime contribute to Armenia’s vulnerability to money laundering. Armenia’s large shadow economy is largely unrelated to criminal activity other than tax evasion, but schemes that are commonly used in Armenia to avoid taxation are similar to those used for money laundering, including the fraudulent invoicing of imports, double bookkeeping and misuse of the banking system. The large number of diaspora Armenians and those temporarily working abroad helps explain the large volume of money transfers and remittances into Armenia, mostly sent through the banking system. There are also about 30 casinos on the outskirts of Yerevan that will be subject to the new anti-money laundering regime that the Government plans to implement in 2005.

The Government of Armenia (GOA) has made great progress in 2004 in bringing legislation and structural capacity up to international standards in the area of money laundering and terrorist finance. On December 14, 2004, the National Assembly adopted a comprehensive anti-money laundering law, "The Law on Fighting Legalization of Illegally Received Income and Terrorist Financing." This legislation consolidates old laws into a single piece of legislation, adds new regulatory structures, and specifically criminalizes money laundering and the financing of terrorism. The law was submitted to President Kocharian on December 22, 2004, and will take effect approximately two months after signature. The new law is part of an anti-money laundering and counterterrorism financing package with which the GOA seeks to meet the recommendations of the Council of Europe (MONEYVAL), UNSCR 1373 requirements and the FATF Forty Recommendations. In addition to the new law, the comprehensive package includes amendments to 12 existing laws and the Criminal Code, affecting banking, credit and non-profit organizations, insurance, and gaming.

The new law designates the Central Bank of Armenia (CBA) as the single authorized body to coordinate anti-money laundering and counterterrorist financing activities in the country. The CBA is working to develop a series of implementing regulations (aiming to have them take effect by June 2005) and plans to set up a financial intelligence unit (FIU) by March 2005. The implementing regulations include the charter regulating CBA activities and defining CBA’s, the FIU’s and other reporting entities’ mandates and the relationships among them. The law creates a single FIU, housed within the CBA, with authority to collect and analyze data from banks, non-banking financial institutions, and non-profit organizations, as well as gambling enterprises. The law requires financial institutions to report any non-real estate transaction of more than 20 million Armenian dram ($40,000), real estate transactions of more than 50 million dram ($100,000) and any single money transfer of more than five million dram ($10,000). The law also requires state registration authorities to report any business purchase exceeding 30 million dram ($60,000) in a sole proprietorship and 40 million dram ($80,000) for other types of companies. Failure to comply with any CBA requirement will subject the commercial bank to civil liability. The law also will give financial institutions immunity from civil liability for cooperating with investigations.

Not all institutions covered by the law will have to report directly to the FIU. Casinos and insurance companies will still report directly to their regulator in the Ministry of Finance, which will pass on any suspicious information to the FIU. It is unclear in the proposed law what authority the FIU will have to inspect these institutions directly. Individuals must declare cash in excess of $10,000 they transport into or out of the country to the Customs service, which will then transmit these records to the FIU. The FIU envisaged by the proposed law will not be a law enforcement agency. The law provides for the FIU to transfer active cases to the Procurator General’s office for prosecution. According to the CBA, there are currently five open investigations based on suspicious financial transactions.

The GOA has sought American cooperation concerning information about specific transfers between Armenian and American banks in one of its money laundering investigations.

Financing of terrorism has been criminalized. The CBA has circulated to all banks lists of those named on the UNSCR 1267 sanctions list as associated with terrorist organizations and has instructed the banks to freeze their accounts. There have been no matches as of December 2004.

Armenia is a member of the Council of Europe’s Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures (MONEYVAL). Armenia is a party to the 1988 UN Drug Convention, the UN Convention on Mutual Assistance in Criminal Matters, the UN Convention against Transnational Organized Crime, and the European Convention on Mutual Assistance in Criminal Matters. During 2004, Armenia became party to the UN International Convention for the Suppression of the Financing of Terrorism and the Council of Europe Convention on Laundering Search, Seizure, and Confiscation of the Proceeds From Crime.

Armenia should continue to strive to create a comprehensive anti-money laundering/counterterrorist financing regime. The Government of Armenia should fully enact and implement its new law and ensure its new financial intelligence unit (FIU) will have the authority and powers necessary to meet its responsibilities.