Money laundering has increasingly become a common phenomenon in societies or developing countries.
This method of financial and legal operations has evolved into a separate economic element with its own methods and approaches for giving a lawful appearance to property obtained through criminal means.
The process itself involves introducing funds obtained through criminal activity into the flow of commercial transactions, where, due to imperfections in laws, technologies, and management systems, it becomes impossible to identify the true source of income.
The primary tools used in such operations include well-known fictitious (sham) transactions, third parties, offshore jurisdictions, as well as banking systems that ensure anonymity and confidentiality of beneficiaries.
In our dynamic era, a struggle is underway between states and the shadow economy, where various methods are used to prevent money laundering for the purpose of tax evasion.
One of the key supporters in this fight is the OECD, which introduces initiatives to make the economies of its member states more transparent and to counteract tax avoidance schemes.
The year 2008 marked the starting point of Kazakhstan’s cooperation with the OECD.
The introduction of OECD standards into economic practice and Kazakhstan’s progress toward these standards contributes to the country’s goal of entering the group of the world’s top 30 developed economies.
Accordingly, a law was adopted and measures were taken to implement OECD recommendations aimed at combating the legalization (laundering) of proceeds from crime and the financing of terrorism.
To understand the purpose of this, we refer to the assessment of the international organization Global Financial Integrity (GFI). Kazakhstan is among the TOP 12 countries with the highest average annual illegal outflow of capital in 2000–2009, with USD 123.057 billion illegally transferred abroad.
According to GFI, capital outflow is associated with crime, corruption, tax evasion, and other unlawful activities. The report emphasizes that this process is driven primarily by a decrease in international trade volumes, foreign direct investment, and new external borrowing rather than by unlawful actions of the government.
One of the instruments used to combat this issue is the Law of the Republic of Kazakhstan dated 28 August 2009 No. 191-IV “On Combating the Legalization (Laundering) of Proceeds from Crime and the Financing of Terrorism” (hereinafter, the “Law”). According to this Law, employees of banks, exchanges, insurance companies and others are obliged to report to the authorized body any transaction exceeding 3,000,000 tenge.
For comparison, in the United Kingdom, five legislative acts regulate measures to combat money laundering and the financing of terrorism: Terrorism Act 2000, Anti-terrorism, Crime and Security Act 2001, Proceeds of Crime Act 2002, Serious Organised Crime and Police Act 2005, and Money Laundering Regulations 2007. Under the Proceeds of Crime Act 2002, money laundering is punishable by up to 14 years of imprisonment and a fine determined by the court. A bank employee or investment company officer must report all suspicious transactions; failure to do so may result in a fine and up to seven years of imprisonment. If a company director fails to establish a procedure for monitoring suspicious transactions, they may receive a two-year prison sentence and a fine.
Furthermore, the UK system has no minimum threshold for the amounts subject to investigation. Financial transactions need not demonstrate typical indicators of money laundering to fall under the scrutiny of UK law. Additionally, it is impossible to open a bank account in the UK within one day; banks take approximately one week to verify a new client.
Banks that fail to properly verify their clients risk not only their reputation but also financial penalties. For example, in August 2014, the United States fined the British bank Standard Chartered for failing to stop “suspicious transactions” with Iranian clients.
Thus, work in this area must continuously continue on all fronts — legal, economic, and others — to attract investment, increase competitiveness, and develop private entrepreneurship.
The Law contains provisions on combating the legalization of proceeds from crime and the financing of terrorism, as well as criteria for recognizing a transaction as an act of money laundering. It is recommended to conduct preliminary checks of transactions exceeding 3 million tenge for the presence of such indicators under the Law. In cases where it is difficult to determine whether a company’s transaction may be considered money laundering, our experienced team can assist with the analysis and provide an assessment of the issue.
This method of financial and legal operations has evolved into a separate economic element with its own methods and approaches for giving a lawful appearance to property obtained through criminal means.
The process itself involves introducing funds obtained through criminal activity into the flow of commercial transactions, where, due to imperfections in laws, technologies, and management systems, it becomes impossible to identify the true source of income.
The primary tools used in such operations include well-known fictitious (sham) transactions, third parties, offshore jurisdictions, as well as banking systems that ensure anonymity and confidentiality of beneficiaries.
In our dynamic era, a struggle is underway between states and the shadow economy, where various methods are used to prevent money laundering for the purpose of tax evasion.
One of the key supporters in this fight is the OECD, which introduces initiatives to make the economies of its member states more transparent and to counteract tax avoidance schemes.
The year 2008 marked the starting point of Kazakhstan’s cooperation with the OECD.
The introduction of OECD standards into economic practice and Kazakhstan’s progress toward these standards contributes to the country’s goal of entering the group of the world’s top 30 developed economies.
Accordingly, a law was adopted and measures were taken to implement OECD recommendations aimed at combating the legalization (laundering) of proceeds from crime and the financing of terrorism.
To understand the purpose of this, we refer to the assessment of the international organization Global Financial Integrity (GFI). Kazakhstan is among the TOP 12 countries with the highest average annual illegal outflow of capital in 2000–2009, with USD 123.057 billion illegally transferred abroad.
According to GFI, capital outflow is associated with crime, corruption, tax evasion, and other unlawful activities. The report emphasizes that this process is driven primarily by a decrease in international trade volumes, foreign direct investment, and new external borrowing rather than by unlawful actions of the government.
One of the instruments used to combat this issue is the Law of the Republic of Kazakhstan dated 28 August 2009 No. 191-IV “On Combating the Legalization (Laundering) of Proceeds from Crime and the Financing of Terrorism” (hereinafter, the “Law”). According to this Law, employees of banks, exchanges, insurance companies and others are obliged to report to the authorized body any transaction exceeding 3,000,000 tenge.
For comparison, in the United Kingdom, five legislative acts regulate measures to combat money laundering and the financing of terrorism: Terrorism Act 2000, Anti-terrorism, Crime and Security Act 2001, Proceeds of Crime Act 2002, Serious Organised Crime and Police Act 2005, and Money Laundering Regulations 2007. Under the Proceeds of Crime Act 2002, money laundering is punishable by up to 14 years of imprisonment and a fine determined by the court. A bank employee or investment company officer must report all suspicious transactions; failure to do so may result in a fine and up to seven years of imprisonment. If a company director fails to establish a procedure for monitoring suspicious transactions, they may receive a two-year prison sentence and a fine.
Furthermore, the UK system has no minimum threshold for the amounts subject to investigation. Financial transactions need not demonstrate typical indicators of money laundering to fall under the scrutiny of UK law. Additionally, it is impossible to open a bank account in the UK within one day; banks take approximately one week to verify a new client.
Banks that fail to properly verify their clients risk not only their reputation but also financial penalties. For example, in August 2014, the United States fined the British bank Standard Chartered for failing to stop “suspicious transactions” with Iranian clients.
Thus, work in this area must continuously continue on all fronts — legal, economic, and others — to attract investment, increase competitiveness, and develop private entrepreneurship.
The Law contains provisions on combating the legalization of proceeds from crime and the financing of terrorism, as well as criteria for recognizing a transaction as an act of money laundering. It is recommended to conduct preliminary checks of transactions exceeding 3 million tenge for the presence of such indicators under the Law. In cases where it is difficult to determine whether a company’s transaction may be considered money laundering, our experienced team can assist with the analysis and provide an assessment of the issue.