Resolution of the Board

of the National Bank

of the Kyrgyz Republic

of 27 December 2023

No. 2023-P-12/82-7-(NPA)

On Amending

Certain Regulatory Legal Acts of the National Bank of the Kyrgyz Republic on Countering the Financing of Terrorist Activities and the Legalization (Laundering) of Criminal Proceeds

In accordance with Articles 5, 9 and 64 of the Constitutional Law of the Kyrgyz Republic "On the National Bank of the Kyrgyz Republic", the Board of the National Bank of the Kyrgyz Republic resolves:

1. To amend the following resolutions of the Board of the National Bank of the Kyrgyz Republic (attached):

• "On Approval of the Instruction on Working with Bank Accounts, Accounts for Bank Deposits" of 31 October 2012 No. 41/12;

• "On Approval of the Instruction on Working with Bank Accounts, Accounts for Bank Deposits Opened in Accordance with Islamic Principles of Banking and Financing" of 13 June 2019 No. 2019-P-12/31-2-(NPA);

• "On Approval of the Regulation "On Minimum Requirements for the Organization of Internal Control in Commercial Banks for the Purposes of Countering the Financing of Terrorist Activities and the Legalization (Laundering) of Criminal Proceeds", the Regulation "On the Procedure for Conducting Exchange Operations with Cash Foreign Currency in the Kyrgyz Republic" and on Amending and Supplementing Certain Regulatory Legal Acts of the National Bank of the Kyrgyz Republic on Countering the Financing of Terrorist Activities and the Legalization (Laundering) of Criminal Proceeds" of 14 August 2019 No. 2019-P-12/42-1-(NPA);

• "On Approval of the Regulation "On Minimum Requirements for the Organization of Internal Control in Microfinance Organizations, Credit Unions and Specialized Financial Institutions of the Kyrgyz Republic for the Purposes of Countering the Financing of Terrorist Activities and the Legalization (Laundering) of Criminal Proceeds" of 21 August 2019 No. 2019-P-33/43-6-(NFKU);

• "On Approval of the Regulation "On Minimum Requirements for the Organization of Internal Control in Exchange Bureaus of the Kyrgyz Republic for the Purposes of Countering the Financing of Terrorist Activities and the Legalization (Laundering) of Criminal Proceeds" of 21 August 2019 No. 2019-P-33/43-7-(NFKU);

• "On Amending Certain Regulatory Legal Acts of the National Bank of the Kyrgyz Republic" of 15 December 2021 No. 2021-P-12/70-3-(NPA);

• "On Approval of the Instruction "On Conducting Inspectoral Audits of the Activities of Non-Bank Financial and Credit Organizations and Other Legal Entities Supervised by the National Bank of the Kyrgyz Republic" of 17 August 2022 No. 2022-P-33/52-2-(NFKU);

• "On Approval of the Instruction on Determining Standards of Sufficiency (Adequacy) of Capital of Commercial Banks of the Kyrgyz Republic" of 12 October 2022 No. 2022-P-12/63-1-(NPA).

2. This resolution enters into force upon the expiration of 15 (fifteen) days from the day of official publication.

3. To the Legal Department:

• from the day of receipt of the relevant documents, within 3 (three) working days, to publish this resolution on the official website of the National Bank of the Kyrgyz Republic;

• after official publication, to send this resolution to the Ministry of Justice of the Kyrgyz Republic for inclusion in the State Register of Regulatory Legal Acts of the Kyrgyz Republic.

4. To the Supervision Methodology Department, after official publication, within 3 (three) working days, to bring this resolution to the attention of commercial banks, the Legal Entity Association "Union of Banks of Kyrgyzstan", the Legal Entity Association "Association of Microfinance Organizations", the Legal Entity Association "National Association of Credit Unions and Cooperatives", non-bank and specialized financial and credit organizations, Open Joint-Stock Company "Housing Savings Credit Company "People's Housing Company", exchange bureaus, the State Financial Intelligence Service under the Ministry of Finance of the Kyrgyz Republic, structural subdivisions, regional departments and the Representative Office of the National Bank of the Kyrgyz Republic in Batken Oblast.

5. To entrust control over the execution of this resolution to the member of the Board of the National Bank of the Kyrgyz Republic supervising the Supervision Methodology Department.

Acting Chairman K. Kulenbekov

Annex
to the resolution of the Board of the National Bank of the Kyrgyz Republic of 27 December 2023 No. 2023-P-12/82-7-(NPA)

Amendments to Certain Regulatory Legal Acts

of the National Bank of the Kyrgyz Republic on Issues

of Countering the Financing of Terrorist Activities and the Legalization (Laundering) of Criminal Proceeds

1. To introduce into the resolution of the Board of the National Bank of the Kyrgyz Republic "On Approval of the Instruction on Working with Bank Accounts, Accounts for Bank Deposits" of 31 October 2012 No. 41/12 the following amendments:

in the Instruction on Working with Bank Accounts, Accounts for Bank Deposits, approved by the above-mentioned resolution:

• in paragraph 11:

to supplement the paragraph:

with paragraph eleven of the following content:

"Notary's deposit is a special account opened by a notary in a bank, in accordance with the requirements of the legislation of the Kyrgyz Republic on notaries.";

with paragraphs twenty-fourth and twenty-fifth of the following content:

"Target reclamation account is understood in the meaning specified in the Regulation "On Reclamation of Lands Disturbed in the Process of Subsoil Use", approved by the resolution of the Government of the Kyrgyz Republic of 18 August 2017 No. 517.

Escrow account is a special account opened on the basis of a tripartite agreement concluded between the seller, the buyer of movable/immovable property and the bank, for the purpose of transferring to the seller funds in national currency after registration of the contract of sale of movable/immovable property.";

• to supplement paragraph 15-1 with paragraph two of the following content:

“Special accounts may include an escrow account, a targeted reclamation account, and a notary’s deposit.”;

• item 22-1 shall be stated in the following wording:

“22-1. If, when opening an account or conducting operations on the account, the bank has suspicions that the operations (transactions) are related to the financing of terrorist activities and the legalization (laundering) of criminal proceeds, the bank must apply the following measures:

• conduct identification and verification of the client and the beneficial owner, regardless of any exceptions or established threshold values;

• conduct a comprehensive analysis of the business relationship or the operation (transaction) and make a decision to recognize the business relationship or the operation (transaction) as suspicious;

• suspend the suspicious operation (transaction) for up to 5 (five) business days and, within 5 (five) hours from the moment the operation (transaction) is recognized as suspicious in the established procedure, send a report on the suspicious operation (transaction) to the financial intelligence body. The financial intelligence body, within 5 (five) business days, makes a decision based on the results of the analysis of the suspicious operation (transaction) and communicates it to the bank;

• suspend or terminate the business relationship with the client.”;

• in Appendix 1 to the Instruction:

subparagraph 1 of paragraph 5 shall be supplemented with a third paragraph of the following content:

“- general civil passport of a citizen of the Kyrgyz Republic (for citizens of the Kyrgyz Republic permanently residing outside the Kyrgyz Republic and not holding a passport of a citizen of the Kyrgyz Republic) if it contains a mark from a diplomatic mission or consular office of the Kyrgyz Republic on registration for consular purposes in accordance with the requirements of the legislation of the Kyrgyz Republic;”;

• in Appendix 3 to the Instruction:

in the first paragraph of paragraph 3, the words “(offshore zones)” shall be replaced by the words “(including offshore zones)”;

the ninth paragraph of paragraph 7 shall be stated in the following wording:

“- requesting information on whether the correspondent bank has such clients as shell banks, banks registered in the territory of high-risk countries, including offshore zones;”.

2. To introduce the following amendments to the resolution of the Board of the National Bank of the Kyrgyz Republic “On approval of the Instruction on working with bank accounts, accounts for bank deposits (deposits) opened in accordance with Islamic principles of banking and financing” dated 13 June 2019 No. 2019-P-12/31-2-(NPA):

in the Instruction on working with bank accounts, accounts for bank deposits (deposits) opened in accordance with Islamic principles of banking and financing, approved by the above-mentioned resolution:

• in paragraph 9:

the paragraph shall be supplemented:

with a fifth paragraph of the following content:

“A notary’s deposit is a special account opened by a notary in a bank in accordance with the requirements of the legislation of the Kyrgyz Republic on notaries.”;

with eighth and ninth paragraphs of the following content:

“A targeted reclamation account is understood in the meaning specified in the Regulation “On reclamation of lands disturbed in the process of subsoil use”, approved by resolution of the Government of the Kyrgyz Republic dated 18 August 2017 No. 517.

An escrow account is a special account opened on the basis of a tripartite agreement concluded between the seller, the buyer of movable/immovable property and the bank, for the purpose of transferring funds in national currency to the seller after registration of the purchase and sale agreement for the movable/immovable property.”;

• paragraph 13 shall be supplemented with a second paragraph of the following content:

“Special accounts may include an escrow account, a targeted reclamation account, and a notary’s deposit.”;

• the Instruction shall be supplemented with paragraphs 21-1, 21-2, 21-3, 21-4 of the following content:

“21-1. If, when opening an account or conducting operations on the account, the bank has suspicions that the operations (transactions) are related to the financing of terrorist activities and the legalization (laundering) of criminal proceeds, the bank must apply the following measures:

• conduct identification and verification of the client and the beneficial owner, regardless of any exceptions or established threshold values;

• conduct a comprehensive analysis of the business relationship or the operation (transaction) and make a decision to recognize the business relationship or the operation (transaction) as suspicious;

• suspend the suspicious operation (transaction) for up to 5 (five) business days and, within 5 (five) hours from the moment the operation (transaction) is recognized as suspicious in the established procedure, send a report on the suspicious operation (transaction) to the financial intelligence body. The financial intelligence body, within 5 (five) business days, makes a decision based on the results of the analysis of the suspicious operation (transaction) and communicates it to the bank;

• suspend or terminate the business relationship with the client.

21-2. If the bank is convinced that conducting proper customer due diligence will lead to disclosure of information about the suspicions that have arisen, the bank does not take measures for proper customer due diligence and sends a report on the suspicious operation (transaction) to the financial intelligence body.

21-3. If, in relation to the client or beneficial owner, there is information about participation in terrorist or extremist activities and the proliferation of weapons of mass destruction, obtained in accordance with the norms of the legislation of the Kyrgyz Republic, the bank must, without prior notification of the client, immediately freeze the operation (transaction) and/or funds of the client included in the Sanctions List, and within 3 (three) hours from the moment of freezing send a report to the financial intelligence body.

The procedure for freezing and unfreezing an operation (transaction) and/or funds, as well as the procedure for providing access to frozen funds and managing frozen funds, shall be established by the Cabinet of Ministers of the Kyrgyz Republic.

21-4. The bank is obliged to check the identification data of the client, the client's authorized representative, the beneficial owner and the client's counterparty for the presence or absence in the List of persons, groups, organizations in respect of which there is information about their participation in the legalization (laundering) of criminal proceeds. This check is carried out before establishing and in the course of conducting business relations with the client and (or) before carrying out any operation (transaction) of the client.

If there is information in respect of the client or the beneficial owner about participation in the legalization (laundering) of criminal proceeds, the bank is obliged to immediately suspend the operation (transaction) being carried out by the client and to report this to the financial intelligence body within 3 (three) hours from the moment of suspension of the operation (transaction).

Operations (transactions) are suspended until a decision is taken to seize property, adopted in accordance with the criminal procedure legislation of the Kyrgyz Republic.

In the event that no decision is taken to seize property, the suspended operation (transaction) is carried out in the established procedure and on the basis of an order of the financial intelligence body.".

• in Appendix 1 to the Instruction:

the third paragraph of subparagraph 1 of paragraph 5 shall be set out in the following wording:

"- general civil passport of a citizen of the Kyrgyz Republic (for citizens of the Kyrgyz Republic permanently residing outside the Kyrgyz Republic and not having a passport of a citizen of the Kyrgyz Republic) if it contains a mark of the diplomatic mission or consular institution of the Kyrgyz Republic on registration for consular purposes in accordance with the requirements of the legislation of the Kyrgyz Republic;";

• in Appendix 3 to the Instruction:

the ninth paragraph of paragraph 8 shall be set out in the following wording:

"- requesting information on whether the correspondent bank has such clients as shell banks, banks registered in the territory of high-risk countries, including offshore zones;".

3. To introduce into the resolution of the Board of the National Bank of the Kyrgyz Republic "On approval of the Regulation "On minimum requirements for the organization of internal control in commercial banks for the purposes of countering the financing of terrorist activities and the legalization (laundering) of criminal proceeds", the Regulation "On the procedure for conducting exchange operations with cash foreign currency in the Kyrgyz Republic" and on introducing amendments and additions to certain normative legal acts of the National Bank of the Kyrgyz Republic on issues of countering the financing of terrorist activities and the legalization (laundering) of criminal proceeds" dated 14 August 2019 No. 2019-П-12/42-1-(НПА) the following amendments:

in the Regulation "On minimum requirements for the organization of internal control in commercial banks for the purposes of countering the financing of terrorist activities and the legalization (laundering) of criminal proceeds", approved by the above-mentioned resolution:

• in paragraph 3:

the third paragraph shall be set out in the following wording:

"Close relatives (parents, adoptive parents, adopted persons, full and half brothers and sisters, grandfather, grandmother, grandchildren, in respect of whom a public official bears financial costs in terms of covering expenses for accommodation, education, healthcare and other necessary expenses).";

to supplement with the tenth paragraph of the following content:

"Client – an individual or legal entity (organization), foreign trust or legal formation, accepted for servicing or being serviced in the bank, or with which banks establish or have established business relations.";

• in paragraph 8:

the fourth paragraph of subparagraph 3 shall be set out in the following wording:

"- identification of the beneficial owner and taking accessible and reasonable measures to verify the beneficial owner of clients, including those that are legal formations (foreign trusts, etc.);";

to supplement with subparagraph 14-1 of the following content:

"14-1) conducting monitoring of the application of the internal control program and internal documents of the bank in the field of PFTD/LPD and, if necessary, their improvement;";

• subparagraph 1 of paragraph 27 shall be set out in the following wording:

"1) assess, determine, document and constantly update their risks by clients, countries, products, services, operations (transactions) and delivery channels in order to allocate resources and reduce risks, including taking into account the results of the national risk assessment and typical criteria of high and low risks;";

• subparagraph 5 of paragraph 32 shall be set out in the following wording:

"5) regular updating of identification data of the client and beneficial owner using a risk-based approach, but not less than once a year;";

• subparagraph 4 of paragraph 33 shall be supplemented with the second paragraph of the following content:

"The application of simplified measures for managing and reducing risks is not allowed if there are suspicions of the client carrying out financing of terrorist activities and legalization (laundering) of criminal proceeds.".

• paragraph 39 shall be set out in the following wording:

"39. The bank must ensure compliance with all procedures developed for the purpose of exercising proper control of the risk of financing terrorist activities and legalization (laundering) of criminal proceeds associated with the application and introduction of new technologies, products and services, as well as new business practices for existing or new banking products using new mechanisms or emerging technologies, including those involving operations (transactions) without direct contact with the client.";

• paragraph 43 shall be set out in the following wording:

"43. Before the start of the introduction of new types of services, operations, technologies, as well as business practices for existing or new products, the bank must identify and assess all possible risks relating to this service, operation, technology and business practice for the purposes of countering the financing of terrorist activities and the legalization (laundering) of criminal proceeds.".

In the Regulation "On the Procedure for Conducting Exchange Operations with Cash Foreign Currency in the Kyrgyz Republic", approved by the above-mentioned resolution:

• in paragraph 8:

in subparagraph 24, replace the figure "70000" with the figure "100000";

in subparagraph 1 of paragraph 27, replace the figure "70000" with the figure "100000";

• in paragraph 30:

in subparagraph 1, replace the figure "70000" with the figure "100000";

in the fourth paragraph of subparagraph 2, replace the figure "70000" with the figure "100000".

4. To introduce the following amendments to the resolution of the Board of the National Bank of the Kyrgyz Republic "On approval of the Regulation 'On Minimum Requirements for the Organization of Internal Control in Microfinance Organizations, Credit Unions and Specialized Financial Institutions of the Kyrgyz Republic for the Purpose of Countering the Financing of Terrorist Activities and the Legalization (Laundering) of Criminal Proceeds'" of 21 August 2019 No. 2019-P-33/43-6-(NFKU):

in the Regulation "On Minimum Requirements for the Organization of Internal Control in Microfinance Organizations, Credit Unions and Specialized Financial Institutions of the Kyrgyz Republic for the Purpose of Countering the Financing of Terrorist Activities and the Legalization (Laundering) of Criminal Proceeds", approved by the above-mentioned resolution:

• the eleventh paragraph of paragraph 3 shall be set out in the following wording:

"Close relatives – parents, adoptive parents, adopted persons, full and half brothers and sisters, grandfather, grandmother, grandchildren, in respect of whom a public official bears financial expenses in terms of covering expenses for accommodation, education, healthcare and other necessary expenses.";

• paragraph 5 shall be supplemented with subparagraph 7-1 of the following content:

"7-1) conducting monitoring of the application of the internal control program and internal documents of MFOs, CUs and SFIs in the field of CFT/AML and, where necessary, their improvement and expansion;";

• the Regulation shall be supplemented:

with paragraph 5-1 of the following content:

"5-1. MFOs, CUs and SFIs must develop and ensure the implementation of internal control programs by their branches and representative offices, as well as subsidiary and dependent companies operating in the territory of the Kyrgyz Republic and a foreign state.

In the event that the legislation of a foreign state does not permit the application of internal control programs and the requirements of the legislation of the Kyrgyz Republic in the field of CFT/AML, branches and representative offices, as well as subsidiary and dependent companies of MFOs, CUs and SFIs shall apply the necessary risk management measures and report this to the National Bank.";

with paragraph 16-1 of the following content:

"16-1. MFOs, CUs and SFIs are obliged to assess, identify, document and continuously update their risks by clients, countries, products, services, operations (transactions) and delivery channels in order to allocate resources and reduce risks.";

• subparagraph 5 of paragraph 26 shall be set out in the following wording:

"5) regular updating of the identification data of the client and the beneficial owner using a risk-based approach, but not less than once a year;";

• subparagraph 4 of paragraph 27 shall be supplemented with the second paragraph of the following content:

"The application of simplified measures for managing and reducing risks is not permitted where there are suspicions of the client carrying out the financing of terrorist activities and the legalization (laundering) of criminal proceeds.";

• the Regulation shall be supplemented with paragraph 28-1 of the following content:

"28-1. MFOs, CUs, SFIs are obliged to identify and assess the risks that may arise in connection with the development and introduction of new financial products, services and technologies, as well as new business practices for existing or new financial products, using new mechanisms or developing technologies. This assessment must be carried out before the introduction or use of the above-mentioned products, services, technologies and business practices.".

5. To introduce the following amendment to the resolution of the Board of the National Bank of the Kyrgyz Republic "On approval of the Regulation 'On Minimum Requirements for the Organization of Internal Control in Exchange Bureaus in the Kyrgyz Republic for the Purpose of Countering the Financing of Terrorist Activities and the Legalization (Laundering) of Criminal Proceeds'" of 21 August 2019 No. 2019-P-33/43-7-(NFKU):

in the Regulation "On Minimum Requirements for the Organization of Internal Control in Exchange Bureaus in the Kyrgyz Republic for the Purpose of Countering the Financing of Terrorist Activities and the Legalization (Laundering) of Criminal Proceeds", approved by the above-mentioned resolution:

• in subparagraph 1 of paragraph 6, replace the figure "70000" with the figure "100000".

6. To introduce the following amendment to the resolution of the Board of the National Bank of the Kyrgyz Republic "On introducing amendments to certain regulatory legal acts of the National Bank of the Kyrgyz Republic" of 15 December 2021 No. 2021-P-12/70-3-(NPA):

• in paragraph 7, replace the words "until January 2024" with the words "until 1 January 2026".

7. To introduce the following amendment to the resolution of the Board of the National Bank of the Kyrgyz Republic "On approval of the Instruction 'On conducting inspections of the activities of non-bank financial and credit organizations and other legal entities supervised by the National Bank of the Kyrgyz Republic'" of 17 August 2022 No. 2022-P-33/52-2-(NFKU):

in the Instruction on conducting inspections of the activities of non-bank financial and credit organizations and other legal entities supervised by the National Bank of the Kyrgyz Republic, approved by the above-mentioned resolution:

• paragraph 31 shall be supplemented with the second paragraph of the following content:

"The inspection report also contains the results of the assessment of risks in the activities of non-bank organizations based on a risk-based approach.".

8. To introduce the following amendment to the resolution of the Board of the National Bank of the Kyrgyz Republic "On approval of the Instruction on determining standards of sufficiency (adequacy) of capital of commercial banks of the Kyrgyz Republic" of 12 October 2022 No. 2022-P-12/63-1-(NPA):

• in paragraph 4, replace the words "1 January 2024" with the words "1 January 2026".