Kazakhstan

Sanctions

No

FATF AML Deficient List

No

Higher Risk

US Dept of State Money Laundering Assessment
Non - Compliance with FATF 40 + 9 Recommendations
Not on EU White list equivalent jurisdictions
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
Failed States Index (Political Issues)(Average Score)

Medium Risk

Weakness in Government Legislation to combat Money Laundering

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ANTI-MONEY LAUNDERING

 

FATF Status

Kazakhstan is not currently identified by FATF as having substantial money laundering and terrorist financing (ML/TF) risks or having strategic AML/CFT deficiencies

 

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Kazakhstan was undertaken by the Financial Action Task Force (FATF) in 2011. According to that Evaluation, Kazakhstan was deemed Fully Compliant for 1 and Largely Compliant for 12 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for 5 of the 6 Core Recommendations.

 

US Department of State Money Laundering assessment (INCSR)

Kazakhstan is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes.

OVERVIEW

 

Kazakhstan is susceptible to money laundering and financial crimes as a transit country for heroin and opiates and because of weak enforcement of its AML regime, as indicated by low investigation and conviction numbers.  Tracking narcotics revenue and investigating financial crimes are a challenge for law enforcement agencies due to the use of informal remittance systems by drug traffickers and lack of capacity to investigate financial crimes committed utilizing sophisticated technology.       

 

In 2018, Kazakhstan continued to work on its money laundering national risk assessment.  The government is seeking to bring its AML regime into greater compliance with international standards.  Kazakhstani law enforcement authorities do not routinely conduct parallel financial investigations while investigating money laundering predicate offenses and weak interagency cooperation prevents information sharing on investigations.  

 

 

SANCTIONS

There are no international sanctions currently in force against this country.

 

BRIBERY & CORRUPTION

 

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           31

World Governance Indicator – Control of Corruption             20

Companies report corruption as the number one constraint for doing business in Kazakhstan. Corruption is rampant throughout the country's political circles, and networks of patronage and clientelism negatively affect the country’s business environment. Furthermore, challenging bureaucracy and vague legislation restricts foreign investment. Navigating the public administration is also challenging for businesses, as petty corruption is endemic. Facilitation payments and bribery are illegal in the public and the private sector according to the country's Criminal Code, but the state bodies that are responsible for combating corruption are ineffective, unreliable, and fail to hold high-level officials responsible for corruption, abuses of office, and conflicts of interest. A weak judicial system further compromises Kazakhstan’s otherwise extensive legal framework for dealing with corruption. For further information - GAN Integrity Business Anti-Corruption Portal

 

ECONOMY

Kazakhstan, geographically the largest of the former Soviet republics, excluding Russia, possesses substantial fossil fuel reserves and other minerals and metals, such as uranium, copper, and zinc. It also has a large agricultural sector featuring livestock and grain. The government realizes that its economy suffers from an overreliance on oil and extractive industries and has embarked on an ambitious diversification program, aimed at developing targeted sectors like transport, pharmaceuticals, telecommunications, petrochemicals and food processing.

Kazakhstan's vast hydrocarbon and mineral reserves form the backbone of its economy. Kazakhstan is landlocked and depends on Russia to export its oil to Europe. In 2010, Kazakhstan joined Russia and Belarus to establish a Customs Union in an effort to boost foreign investment and improve trade. The Customs Union evolved into a Single Economic Space in 2012 and the Eurasian Economic Union (EEU) in January 2015.

The economic downturn of its EEU partner, Russia, and the decline in global commodity prices have

contributed to an economic slowdown in Kazakhstan, which is experiencing its slowest economic growth since the financial crises of 2008-09. Kazakhstan devalued its currency, the tenge, by 19% in February 2014, and in November 2014, the government announced a stimulus package to cope with its economic challenges. In spring 2015, Kazakhstan embarked on an ambitious reform agenda to modernize its economy and improve its institutions. In the face of further decline in the ruble, oil prices, and the regional economic slowdown, Kazakhstan announced in August 2015 that it would cancel its currency band in favour of a floating exchange rate that sparked further devaluation of the tenge. In 2015, Kazakhstan's president signed into law a new Entrepreneurial Code and a new Labour Code, both aimed at improving the business environment. Despite some positive institutional and legislative changes, investors remain concerned about corruption, bureaucracy, and arbitrary law enforcement, especially at the regional and municipal levels.

Agriculture - products:

grain (mostly spring wheat and barley), potatoes, vegetables, melons; livestock

Industries:

oil, coal, iron ore, manganese, chromite, lead, zinc, copper, titanium, bauxite, gold, silver, phosphates, sulfur, uranium, iron and steel; tractors and other agricultural machinery, electric motors, construction materials

 

Exports - commodities:

oil and oil products, natural gas, ferrous metals, chemicals, machinery, grain, wool, meat, coal

Exports - partners:

China 15.1%, Russia 12.3%, France 9.2%, Germany 7.9%, Italy 6.7%, Greece 4.1% (2015)

Imports - commodities:

machinery and equipment, metal products, foodstuffs

Imports - partners:

Russia 32.9%, China 25.9%, Germany 4.2% (2015)

Investment Climate  -  US State Department

Kazakhstan has made significant progress toward creating a market economy since it gained independence in 1991 and has achieved considerable results in its efforts to attract foreign investment. As of December 31, 2015, total foreign investment in Kazakhstan reached $198.5 billion. Of that total, net Foreign Direct Investment (FDI) constituted $125.1 billion, with portfolio and other investments comprising the remaining $73.3 billion. The majority of foreign investment is in the oil and gas sector and the United States is one of the leading sources of investment capital with around $23.2 billion invested in Kazakhstan as of September 30, 2015.

The country’s vast hydrocarbon and mineral reserves continue to form the backbone of the economy, and foreign investment continues to flow into these extractive sectors. However, the government is making incremental progress toward its goal of diversifying the country’s economy by improving the investment climate. Kazakhstan’s efforts to remove bureaucratic barriers has resulted in the improvement of its ranking on the annual World Bank “Doing Business” report from 53 to 41 out of 189 in 2016.

The government maintains an active dialogue with international investors. President Nazarbayev chairs the Foreign Investors Council, the Prime Minister has regular meetings with foreign investors in cooperation with the American Chamber of Commerce, and the Investment Ombudsman addresses complaints from foreign investors on a case by case basis. In 2015, Nazarbayev signed into the law a new Entrepreneurial Code and a new Labor Code, both aimed at improving the business environment. The Government established a “single window” for investors - special offices around the country where investors receive a wide range of government services such as business registration and work permits. Kazakhstan joined the WTO at the end of 2015 and started to lift local content requirements that contradict the WTO Agreement on Trade Related Investment Measures (TRIMs).

Despite these positive institutional and legislative changes, concerns remain about corruption, bureaucracy, and arbitrary law enforcement, especially at the regional and municipal levels. The government's tendencies to challenge contractual rights, legislate preferences for domestic companies, and attempt to intervene in foreign companies' operations continue to discomfort foreign investors.

 

 

Country Links

Committee on Financial Monitoring of the Ministry of Finance of the Republic of Kazakhstan (Finmonitoring)
National Bank of Kazakhstan
Other Useful Links
FATF
US State Department
Transparency International
World Bank
CIA World Factbook

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