REPEALED

in accordance with the resolution of the Board of the National Bank of the Kyrgyz Republic

dated 29 December 2010 No. 96/2

	Approved by resolution of the Board of the National Bank of the Kyrgyz Republic dated 15 May 2007 No. 26/1

REGULATION on minimum requirements for organizing internal control in commercial banks and other financial and credit institutions licensed by the NBKR for the purpose of countering the financing of terrorism (extremism) and the legalization (laundering) of criminally obtained income

(As amended by resolutions of the Board of the National Bank of the Kyrgyz Republic dated 27 June 2008 No. 25/8, 14 October 2009 No. 41/3)

1. General provisions

2. Terms and definitions

3. Internal control policy for countering the financing of terrorism (extremism) and the legalization (laundering) of criminally obtained income

4. The official appointed for the purpose of organizing internal control for countering the financing of terrorism (extremism) and the legalization (laundering) of criminally obtained income

5. Determining the level of risk of a client carrying out the legalization (laundering) of criminally obtained income and the financing of terrorism (extremism)

6. Identification of operations (transactions) subject to mandatory control

7. Recording, storage and transmission to the authorized body of information identified during the review

1. General provisions

1.1. This Regulation has been developed in accordance with the Law of the Kyrgyz Republic "On the National Bank of the Kyrgyz Republic", the Law of the Kyrgyz Republic "On Banks and Banking Activity in the Kyrgyz Republic", the Law of the Kyrgyz Republic "On Countering the Financing of Terrorism and the Legalization (Laundering) of Criminally Obtained Income" (hereinafter - the Law "On CFT/AML").

1.2. The purpose of this Regulation is to define minimum requirements for organizing internal control in commercial banks and other financial and credit institutions licensed by the National Bank of the Kyrgyz Republic, including those operating in accordance with Islamic principles of banking and financing, banks having an Islamic window (hereinafter - banks) for the purpose of countering the financing of terrorism (extremism) and the legalization (laundering) of criminally obtained income (hereinafter - CFT/AML).

(As amended by resolution of the Board of the National Bank of the Kyrgyz Republic dated 14 October 2009 No. 41/3)

1.3. The National Bank of the Kyrgyz Republic conducts inspections of the activities of banks on issues of organizing internal control for CFT/AML purposes and sends information on its results to the authorized state body in the sphere of CFT/AML.

(As amended by resolution of the Board of the National Bank of the Kyrgyz Republic dated 14 October 2009 No. 41/3)

2. Terms and definitions

For the purposes of this Regulation the following concepts are used:

Beneficiary - a person possessing the right of ownership to monetary funds or property, and on whose behalf and/or at whose expense a client carries out an operation (transaction) with monetary funds or property, or who, in accordance with an agreement concluded between such person and the client, has the possibility to directly or indirectly influence the client's carrying out of operations (transactions) with monetary funds or property.

Suspicious operation (transaction) - an operation (transaction) falling under the signs of suspicious operations (transactions) according to the Law "On CFT/AML", that is, operations (transactions) carried out with monetary funds or other property which do not have a clear economic or obvious lawful purpose and are not characteristic of the activity of the given legal or natural person (persons) according to the list of signs of suspicious operations approved by the authorized state body in the sphere of CFT/AML (hereinafter the authorized state body).

A suspicious operation (transaction) is determined by the official for CFT/AML within the framework of the Law on CFT/AML for operations carried out with monetary funds or other property of the client and the beneficiary.

Internal control - a set of measures taken by the bank to identify operations (transactions) subject to mandatory control and suspicious operations (transactions), as well as to prevent other operations (transactions) with monetary funds or property directly related to the financing of terrorism (extremism) and the legalization (laundering) of criminally obtained income.

Extremism - activity aimed at the violent change of the foundations of the constitutional order and violation of the integrity of the state, at undermining security and the seizure or appropriation of power, at the creation of illegal armed formations, at the carrying out of terrorist activity and other illegal actions defined by the Law of the Kyrgyz Republic "On Countering Extremist Activity".

Identification - the establishment by the bank of data on the basis of originals or duly certified copies of documents submitted by natural or legal persons in accordance with the Law "On CFT/AML".

Verification - measures to clarify or properly check the results of identification, carried out by the bank, for the purposes of internal control.

Identification of operations subject to mandatory control - a stage of organizing the bank's internal control for CFT/AML purposes, which includes determining operations subject to mandatory control on the basis of the criteria and signs established in the normative legal acts of the Kyrgyz Republic.

Official for CFT/AML - an employee of the bank (at the level of management) appointed for the purpose of organizing internal control for CFT/AML, having access to all information concerning identification, verification, identification, recording and transmission of data to the authorized state body.

Threshold amount - the value established by the Law "On CFT/AML", amounting to 1,000,000 soms (equivalent in foreign currency) at the NBKR accounting rate on the day of the operation (transaction).

Foreign politically significant persons - citizens of foreign states who have been granted or are being granted significant state and political functions in a foreign state (heads of states or governments, high-ranking political figures, senior officials in the government, courts, armed forces, law enforcement and fiscal bodies, leaders and figures of political parties and religious associations), including former ones.

"Islamic window", "Islamic bank", "Bank having an 'Islamic window'", "Islamic principles of banking and financing", "Sharia standards", "Sharia council" - these terms correspond to the norms of the conceptual apparatus of the Law of the Kyrgyz Republic "On Banks and Banking Activity in the Kyrgyz Republic".

All other concepts used in this sphere must not contradict the basic concepts set out in this chapter.

(As amended by resolution of the Board of the National Bank of the Kyrgyz Republic dated 14 October 2009 No. 41/3)

3. Internal control policy for countering the financing of terrorism (extremism) and the legalization (laundering) of criminally obtained income

3.1. For CFT/AML purposes, banks must develop an internal control policy, which must be approved by the bank's Board of Directors. This policy is part of the overall policy for organizing the bank's internal control system.

3.2. The internal control policy for CFT/AML purposes must determine that the bank establishes, as a minimum:

3.2.1. The procedure for organizing internal control, establishing the powers and responsibility of officials for decision-making, the procedure for interaction and accountability between persons and subdivisions involved in the CFT/AML process.

3.2.2. The procedure for the bank's identification and study of its client in accordance with the Law "On CFT/AML", the normative legal acts of the National Bank of the Kyrgyz Republic (hereinafter - NBKR), as well as other normative legal acts of the Kyrgyz Republic.

3.2.3. The procedure for identifying in the client's activity operations subject to mandatory control, and checking information about the client and/or the client's operation to confirm the validity or refute suspicions of the client carrying out the financing of terrorism (extremism) and the legalization (laundering) of criminally obtained income, in accordance with the Law "On CFT/AML".

3.2.4. The procedure for documentary recording of information obtained during the implementation of internal control, as well as the procedure for its storage and ensuring confidentiality.

3.2.5. The procedure for providing to the authorized state body information on suspicious operations (transactions), as well as operations (transactions) with monetary funds or other movable and immovable property falling under the list of criteria according to which operations (transactions) are subject to mandatory control, in accordance with the requirements established by the legislation of the Kyrgyz Republic in the sphere of CFT/AML.

3.3. The internal control policy for CFT/AML purposes must contain requirements for the mandatory request from bank clients of the documents on the basis of which the operation subject to verification for compliance with the signs of a suspicious operation (transaction) is carried out.

3.4. The bank must ensure that subsidiary and dependent companies located both on the territory of the Kyrgyz Republic and abroad comply with proper measures for organizing internal control for CFT/AML purposes.

(As amended by resolution of the Board of the National Bank of the Kyrgyz Republic dated 14 October 2009 No. 41/3)

3.5. Assessment of the effectiveness of internal control for CFT/AML purposes is carried out by the bank's internal audit service.

4. The official appointed for the purpose of organizing internal control for countering the financing of terrorism (extremism) and the legalization (laundering) of criminally obtained income

4.1. The bank must appoint an official for the purpose of developing and implementing the internal control policy, corresponding procedures, as well as other internal organizational measures for CFT/AML (hereinafter - the official for CFT/AML).

4.2. For CFT/AML purposes the official for CFT/AML performs the following functions:

• develops and submits for approval to the Board of Directors, in agreement with the bank's Management Board, the corresponding internal control policy and brings this policy to the attention of all employees who participate in its implementation;

• ensures the implementation of the internal control policy and monitors the execution of the bank's internal normative documents on CFT/AML in accordance with this policy;

• ensures the provision of information and data to the authorized state body in accordance with the requirements established by the legislation of the Kyrgyz Republic;

• provides information and assists authorized representatives of the NBKR during their inspections of the bank's activities on issues within its competence under this Regulation and the bank's internal documents;

• organizes training and advises bank employees who participate in the implementation of the CFT/AML policy;

• as necessary, but not less than once a quarter, submits for consideration to the Board of Directors, in agreement with the bank's Management Board, a written report on the results of the implementation of the internal control policy in the procedure determined by the bank's internal documents.

4.3. In carrying out its functions the official for CFT/AML has the right:

• to receive from the heads and employees of the bank's subdivisions the necessary documents, including orders and other administrative documents issued by the management of the bank and its subdivisions, accounting and monetary-settlement documents;

• to initiate the obtaining of additional information about the client and/or the operation (transaction) to confirm the validity or refute suspicions of the client carrying out the financing of terrorism (extremism) and the legalization (laundering) of criminally obtained income;

• to make copies of the received documents, including copies of electronic documents;

• to address the bank's Board of Directors if necessary;

• to interact with and address the Sharia council(*).

(*) Applies to banks operating in accordance with Islamic principles of banking and financing.

(As amended by resolution of the Board of the National Bank of the Kyrgyz Republic dated 14 October 2009 No. 41/3)

4.4. In carrying out its functions the official for CFT/AML is obliged:

• to ensure the safekeeping and return of documents received from the corresponding subdivisions of the bank;

• to observe the confidentiality of information received in the course of carrying out its functions.

4.5. The official for CFT/AML must be independent in implementing the bank's CFT/AML policy and may combine activity relating to its competence in accordance with this Regulation with the carrying out of other functions, except for the functions:

• of an employee of the internal audit service;

• of an employee carrying out operational activity.

4.6. The following minimum qualification requirements are imposed on the official for CFT/AML:

• higher economic or legal education;

• work experience in subdivisions related to the core activity of financial and credit institutions, totaling not less than three years;

• absence of a criminal record;

• knowledge in the field of Islamic banking and financing(*).

(*) Applies to banks operating in accordance with Islamic principles of banking and financing.

(As amended by resolution of the Board of the National Bank of the Kyrgyz Republic dated 14 October 2009 No. 41/3)

4.7. Training (retraining) of the official for CFT/AML must be carried out on a regular basis, not less than once a year.

4.8. Liability of the official for CFT/AML arises on the grounds provided for by the legislation of the Kyrgyz Republic.

5. Determining the level of risk of a client carrying out the legalization (laundering) of criminally obtained income and the financing of terrorism (extremism)

5.1. The process of identifying and studying the bank's clients includes determining the level of risk of the client carrying out the legalization (laundering) of criminally obtained income and the financing of terrorism (extremism), taking into account the requirements established by the legislation of the Kyrgyz Republic. To determine the level of risk it is necessary, as a minimum, to take into account the type of activity of the client and the location (origin) of the client and/or its business.

5.2. The following types of client activity may be classified as exposed to a higher risk of carrying out the legalization (laundering) of criminally obtained income and the financing of terrorism (extremism):

• the activity of legal entities (their separate subdivisions) that are not credit organizations, engaged in the transfer of monetary funds, cash payments by checks, collection of monetary funds;

• the activity of legal entities (including credit organizations) registered in offshore zones, their separate subdivisions, subsidiaries and dependent companies;

• the activity of non-resident clients, including foreign politically significant persons;

• the gambling business (entrepreneurial activity that is not the sale of products (goods, works, services), related to the extraction by a gambling establishment (casino, totalizator, bookmaker's office, hall of gaming machines and other gambling houses (places)) of income from participation in games of chance in the form of winnings and payment for their conduct);

• activity related to the sale, including on commission, of works of art and antiques;

• trade (especially export) in precious metals, precious stones, as well as jewelry containing precious metals and precious stones.

(As amended by resolution of the Board of the National Bank of the Kyrgyz Republic dated 14 October 2009 No. 41/3)

5.3. The following states (territories) may be classified as exposed to a high risk of carrying out the legalization (laundering) of criminally obtained income and the financing of terrorism (extremism):

• states (territories) that do not apply or apply to an insufficient degree the FATF recommendations, the list of which is determined by the authorized state body together with the NBKR and other supervisory bodies;

• states (territories) in which the disclosure or provision of information during financial operations is not provided for, the list of which is approved by the authorized state body in agreement with the NBKR on the basis of lists approved by international organizations engaged in CFT/AML.

5.4. On the basis of all information and documents allowing the identification, verification and study of the client, the bank assesses the level of risk of the client carrying out possible financing of terrorism (extremism) and legalization (laundering) of criminally obtained income. The conclusion on this assessment is filed in the client's dossier.

(As amended by resolution of the Board of the National Bank of the Kyrgyz Republic dated 14 October 2009 No. 41/3)

5.5. The bank must pay adequate attention and exercise proper control in respect of clients belonging to the category of clients exposed to higher risk.

(As amended by resolution of the Board of the National Bank of the Kyrgyz Republic dated 27 June 2008 No. 25/8)

5.6. When servicing foreign politically significant persons the bank must carry out the following measures:

• before establishing relations with foreign politically significant persons, obtain the written permission of the responsible member of the bank's Management Board;

• take available measures to determine the sources of origin of the monetary funds of foreign politically significant persons;

• on an ongoing basis update the information at its disposal about foreign politically significant persons;

• pay heightened attention to operations (transactions) with monetary funds or property carried out by foreign politically significant persons, their spouses and close relatives in accordance with the Law "On CFT/AML".

(As amended by resolution of the Board of the National Bank of the Kyrgyz Republic dated 14 October 2009 No. 41/3)

5.7. The bank must update the information obtained as a result of identification, verification and study of the client periodically, not less than once a year in cases where the bank assesses the risk of the client carrying out the financing of terrorism (extremism) and the legalization (laundering) of criminally obtained income as high, and in other cases not less than once every three years.

(As amended by resolution of the Board of the National Bank of the Kyrgyz Republic dated 14 October 2009 No. 41/3)

5.8. The bank must ensure compliance with all procedures developed for the purpose of exercising proper control of the risk of financing of terrorism (extremism) and legalization (laundering) of criminally obtained income associated with the use of new technologies (new banking products) involving the carrying out of operations without direct contact.

(As amended by resolution of the Board of the National Bank of the Kyrgyz Republic dated 27 June 2008 No. 25/8)

5.9. When establishing correspondent relations the bank must establish, including by sending a request to the correspondent bank, whether it carries out CFT/AML measures, including identification, verification and study by the correspondent bank of its clients.

(As amended by resolution of the Board of the National Bank of the Kyrgyz Republic dated 14 October 2009 No. 41/3)

6. Identification of operations (transactions) subject to mandatory control

6.1. The bank must determine the procedure for checking the activity of clients for the presence of criteria and signs indicating the possible carrying out of the legalization (laundering) of criminally obtained income established by the normative legal acts of the Kyrgyz Republic. For these purposes the bank conducts monitoring of its business relations with clients on an ongoing basis, which provides for the following measures:

• tracking of operations carried out on the client's account in order to make sure that the client's activity corresponds to the information the bank has about the client, its business and the level of risk for this client;

• if necessary, clarification of the origin of the monetary funds received on the client's account;

• analysis of all complex or unusually large operations that do not have an obvious or visible economic or lawful purpose;

• recording and documenting of all information received by the bank and, if necessary, transmission of this information to the authorized state body.

(As amended by resolution of the Board of the National Bank of the Kyrgyz Republic dated 14 October 2009 No. 41/3)

6.2. An operation (transaction) with monetary funds or other property is subject to mandatory control if the amount for which it is carried out is equal to or exceeds the threshold amount.

(As amended by resolution of the Board of the National Bank of the Kyrgyz Republic dated 14 October 2009 No. 41/3)

6.3. In accordance with the list of criteria determined by the authorized state body in agreement with the NBKR, operations (transactions) with monetary funds or other property subject to mandatory control include:

• all internal or external operations (transactions), except for operations (transactions) the list of which is determined by the authorized state body in agreement with the National Bank of the Kyrgyz Republic;

• purchase or sale of cash foreign currency;

• acquisition by a natural person of securities for cash payment;

• exchange of banknotes of one denomination for banknotes of another denomination;

• movement of monetary funds of charitable, public organizations and institutions, funds;

• placement of securities, precious metals, precious stones or other valuables in a pawnshop;

• payment by a natural person of an insurance contribution or receipt from it of an insurance premium for life insurance and other types of accumulative insurance and pension provision;

• a transaction with immovable property, if the amount for which it is carried out is equal to or exceeds 4,500,000 soms;

• a transaction with movable property;

• receipt or provision of property under a financial lease (leasing) agreement;

• payment of monetary funds in the form of winnings received from playing the lottery, totalizator (mutual betting) or from other risk-based games;

• transfer of monetary funds carried out by non-financial and credit organizations on the instruction of the client;

• transfer of monetary funds through systems allowing such operations to be carried out without opening an account, and their receipt.

(As amended by resolution of the Board of the National Bank of the Kyrgyz Republic dated 14 October 2009 No. 41/3)

6.4. Before the commencement of new types of services or operations the bank must identify and assess all possible risks relating to the given service or operation for the purpose of preventing the financing of terrorism (extremism) and the legalization (laundering) of criminally obtained income.

(As amended by Resolution of the Board of the National Bank of the Kyrgyz Republic of 27 June 2008 No. 25/8)

6.5. The bank is obliged to take the necessary measures to verify whether there is information regarding the client's or beneficiary's participation in terrorist activity. Such information is contained in the List of organizations and individuals in respect of whom there is information about their participation in terrorist activity (financing of terrorism (extremism)), established by the authorized state body.

6.6. Employees of the bank's structural subdivisions who carry out identification of clients and detection of suspicious operations in accordance with the procedure determined by the bank's policy and procedures shall inform the AML/CFT officer.

6.7. If the suspicions are substantiated, the AML/CFT officer shall submit to the Board for consideration information about the client and the operation (transaction) with recommendations on further actions. The bank's Board is responsible for the timely implementation of further actions, including suspension of the operation (transaction) and/or termination of business relations with the client in accordance with the Law "On AML/CFT".

7. Recording, storage and transmission to the authorized body of information identified during the review

7.1. Information about the client's operations (transactions) obtained during the review shall be subject to mandatory documentary recording in volumes sufficient to confirm or refute suspicions that the client is carrying out financing of terrorism (extremism) and/or legalization (laundering) of proceeds of crime.

7.2. If suspicions are confirmed in determining the client's operation as an operation subject to mandatory control, the bank's Board shall adopt a final decision to recognize the client's operation as suspicious and to submit information about it to the authorized state body in accordance with the procedure for transmitting information approved by the authorized state body.

(As amended by Resolution of the Board of the National Bank of the Kyrgyz Republic of 27 June 2008 No. 25/8)

7.3. The decision of the bank's Board not to recognize the client's operation as suspicious and not to send information about it to the authorized state body must be substantiated and recorded in minutes. The AML/CFT officer shall maintain a register of such decisions of the Board, including a brief description of the operations and information about the client.

7.4. The bank is not entitled to inform clients about the transmission of information to the authorized state body in accordance with the Law "On AML/CFT".

7.5. Information and documents containing information about the client, including business correspondence, as well as about the client's operations (transactions), obtained during the review in accordance with this Regulation, shall be stored for at least five years after the termination of relations between the bank and the client.