FATF AML Deficiency List
US Dept of State Money Laundering assessment
Non - Compliance with FATF MER Recommendations
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
Kyrgyzstan is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies
Latest FATF Statement: 27 June 2014
The FATF welcomes Kyrgyzstan’s significant progress in improving its AML/CFT regime and notes that Kyrgyzstan has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies that the FATF had identified in October 2011. Kyrgyzstan is therefore no longer subject to FATF’s monitoring process under its on-going global AML/CFT compliance process. Kyrgyzstan will work with EAG as it continues to address the full range of AML/CFT issues identified in its mutual evaluation report.
Compliance with FATF Recommendations
The latest Follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Kyrgyzstan was undertaken in 2019. According to that Evaluation, Kyrgyzstan was deemed Compliant for 4 and Largely Compliant for 35 of the FATF 40 Recommendations. It was deemed Highly effective for 0 and Substantially Effective for 0 of the Effectiveness & Technical Compliance ratings.
US Department of State Money Laundering assessment (INCSR)
Kyrgyz Republic was last deemed a Jurisdiction of Primary Concern in the US Department of State 2018 International Narcotics Control Strategy Report (INCSR). The Overview from that report was as follows: -
While the Kyrgyz Republic is not a regional financial center, a large shadow economy, corruption, organized crime, and narcotics trafficking make the country vulnerable to financial crimes. In 2019, known remittances from migrant workers comprised nearly 33 percent of its GDP, the majority from Russia. A significant portion of remittances entered the Kyrgyz Republic through informal channels or was hand-carried to the Kyrgyz Republic from abroad. The Kyrgyz Republic, however, is recognized as a stable economy for foreign banks and other financial institutions.
The Kyrgyz Republic is strengthening its efforts to combat money laundering and financial crimes, but continues to confront challenges in implementing new laws and regulations. In the last two years, the Kyrgyz government passed a new AML law and new criminal legislation to match international standards. Challenges in the implementation of international AML/CFT standards mean the country is making minimal progress in the fight against money laundering
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 17
Corruption is pervasive throughout all sectors in Kyrgyzstan; bribery is a common part of doing business. Apart from petty corruption, businesses are likely to experience favoritism and political interference. Recently, several reforms have been undertaken by the government, but a corrupt judiciary undermines their effectiveness. Kyrgyz anti-corruption efforts are growing but remain inadequate. Active and passive bribery are criminalized; however, enforcement of anti-corruption legislation overall is lacking. For further information - GAN Integrity Business Anti-Corruption Portal
Kyrgyzstan is a poor, mountainous country with an economy dominated by minerals extraction, agriculture, and reliance on remittances from citizens working abroad. Cotton, wool, and meat are the main agricultural products, although only cotton is exported in any quantity. Other exports include gold, mercury, uranium, natural gas, and - in some years - electricity. The country has sought to attract foreign investment to expand its export base, including construction of hydroelectric dams, but a difficult investment climate and an ongoing legal battle with Canadian investors in the nation’s largest gold mine deter potential investors. Remittances from Kyrgyz migrant workers in Russia and Kazakhstan are equivalent to about a quarter of Kyrgyzstan’s GDP.
Following independence, Kyrgyzstan rapidly carried out market reforms, such as improving the regulatory system and instituting land reform. Kyrgyzstan was the first Commonwealth of Independent States (CIS) country to be accepted into the World Trade Organization. The government has privatized much of its ownership shares in public enterprises. Despite these reforms, the country suffered a severe drop in production in the early 1990s and has again faced slow growth in recent years as the global financial crisis and declining oil prices have damaged economies across Central Asia.
Kyrgyz leaders hope the country’s August 2015 accession to the Eurasian Economic Union will bolster trade and investment, but slowing economies in Russia and China, low commodity prices, and currency fluctuations continue to hamper economic growth. The keys to future growth include progress in fighting corruption, improving administrative transparency, restructuring domestic industry, and attracting foreign aid and investment.
Agriculture - products:
cotton, potatoes, vegetables, grapes, fruits and berries; sheep, goats, cattle, wool
small machinery, textiles, food processing, cement, shoes, sawn logs, refrigerators, furniture, electric motors, gold, rare earth metals
Exports - commodities:
gold, cotton, wool, garments, meat; mercury, uranium, electricity; machinery; shoes
Exports - partners:
Switzerland 26%, Uzbekistan 22.6%, Kazakhstan 20.8%, UAE 4.9%, Turkey 4.5%, Afghanistan 4.5%, Russia 4.2% (2015)
Imports - commodities:
oil and gas, machinery and equipment, chemicals, foodstuffs
Imports - partners:
China 56.4%, Russia 17.1%, Kazakhstan 9.9% (2015)
Investment Climate - US State Department
The investment climate in the Kyrgyz Republic is best for those who are intrepid and have a high risk tolerance. The country struggles with major commercial issues. Corruption is rampant and rule of law is weak. The judicial system lacks independence and every sector of government confronts capacity and resource shortages. For most areas of commercial interest, a legal framework technically exists, but enforcement is poor - especially with regard to intellectual property rights. Potential investors should be aware that an estimated 60% or more of the economic activity in the country occurs in the unregulated gray economy. Investors in politically sensitive sectors, such as resource extraction, spend much of their time renegotiating contracts, as evidenced by the experience of the Canadian-operated Kumtor gold mine.
Government officials in the Kyrgyz Republic speak positively and with hope of factors they say indicate an improving investment climate. The government has identified FDI as a key component to growing the economy in the coming years and has created a strategic roadmap for economic development designed to facilitate this growth. The government is taking steps to streamline the process of starting a business, as well as its tax regime. Still, many burdensome regulations strangle business development for foreigners and locals alike. Entrepreneurs have yet to see tangible results from reforms.
Additionally, the Kyrgyz Republic struggles to meet basic infrastructure needs. The government has difficulty providing adequate power supply, especially outside of the capital, Bishkek. Power plants, roads, and canals are dilapidated. Municipal waste problems routinely plague Bishkek. Chinese infrastructure projects only improve market access for Chinese goods, and the Russian economic recession has delayed receipt of promised development assistance.
The Kyrgyz Republic is on the verge of several major economic transitions. In August 2015, the country joined the Eurasian Economic Union (EAEU), whose current members also include Russia, Kazakhstan, Armenia, and Belarus. The accession process has altered economic conditions, as cheaper goods from competitive firms of EAEU member states have flooded the local market and disrupted the gray economy, shuttle trading and currency stability. Additionally, EAEU accession has brought a slew of new regulatory burdens with it and Kyrgyz government and business alike have struggled to adapt. Persistent reliance on Russia as a source of remittances, imports, and government financing makes the economy vulnerable Moscow's whims.
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