Kazakhstan -- Travel Rule Implementation Regulatory Overview

Kazakhstan has made significant strides in implementing the FATF Travel Rule, integrating it into its national AML/CFT framework.

Here's a breakdown of the status:

1. Adoption and Effective Date

• Adopted: Yes, Kazakhstan has officially adopted legislation implementing the FATF Travel Rule.
• Legislation: The key legislative act is the Law of the Republic of Kazakhstan "On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Combating Legalization of Criminal Proceeds (Money Laundering) and Financing of Terrorism" (No. 182-VII dated February 2, 2023).
• Effective Date: The amendments came into effect approximately 60 calendar days after their official publication, which means around early April 2023. This law brought virtual assets and virtual asset service providers (VASPs) within the scope of the national AML/CFT regime.
• Compliance with FATF R.16: These amendments aim to align Kazakhstan's legislation with FATF Recommendation 15 (Virtual Assets and VASPs) and its Interpretive Note, which includes the Travel Rule (Recommendation 16).

2. Threshold Amounts

Kazakhstan's implementation uses a tiered approach for information requirements based on transaction value:

• Threshold: Transactions involving virtual assets equal to or exceeding 1,000,000 KZT (one million tenge) are subject to enhanced information requirements. (As of mid-2024, 1,000,000 KZT is approximately USD 2,200).
• Information Required for Transactions ≥ 1,000,000 KZT:
  • Originator Information: Name, surname, patronymic (if any), individual identification number (IIN), address of residence, wallet address.
  • Beneficiary Information: Name, surname, patronymic (if any), individual identification number (IIN), address of residence, wallet address.
• Information Required for Transactions < 1,000,000 KZT:
  • For transactions below the threshold, VASPs are generally required to collect and transmit only the originator's and beneficiary's wallet addresses and the transaction identifier. However, a risk-based approach dictates that VASPs should still be able to identify customers and obtain more information if a transaction is deemed suspicious.

3. Which VASPs are Covered

The amended legislation defines and covers a broad range of virtual asset service providers (VASPs) as "subjects of financial monitoring." This includes entities engaged in:

• Exchange: Exchanging virtual assets for fiat currency or other virtual assets.
• Transfer: Facilitating the transfer of virtual assets.
• Custody/Administration: Safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets.
• Participation and provision of financial services related to: The offering and/or sale of virtual assets by an issuer.
• Other services: Any other activities related to virtual assets that fall under the FATF VASP definition.

This generally covers all entities that conduct business operations on behalf of customers for services involving virtual assets, consistent with FATF guidelines.

4. Technical Implementation Requirements

Kazakhstan's legislation, like most national implementations, does not specify a particular technical solution for Travel Rule compliance. Instead, it mandates the outcome: VASPs must collect, verify, and transmit the required originator and beneficiary information to counterparty VASPs in a secure and compliant manner.

Therefore, VASPs operating in or serving customers in Kazakhstan are expected to:

• Choose a compliant solution: Implement or integrate with a Travel Rule solution (e.g., those offered by TRISA, OpenVASP, Sygna, Notabene, Verite, etc.) that enables the secure, real-time transfer of required data between VASPs.
• Interoperability: Ensure their chosen solution is interoperable with those used by other VASPs, especially for cross-border transactions.
• Internal Policies & Procedures: Develop and implement robust internal policies, procedures, and controls for:
  • Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD).
  • Screening for sanctions and politically exposed persons (PEPs).
  • Risk assessment and management.
  • Data security and privacy (e.g., in compliance with Kazakhstan's data protection laws).
  • Record-keeping of Travel Rule information.
  • Reporting suspicious transactions to the Agency for Financial Monitoring.

5. Penalties for Non-Compliance

Non-compliance with AML/CFT obligations, including the Travel Rule, can lead to severe penalties under Kazakhstan's legislation. The Agency for Financial Monitoring of the Republic of Kazakhstan (AFM) is the primary supervisory and enforcement body. Penalties can include:

• Administrative Fines: Significant monetary penalties for violations, varying based on the severity of the breach, the VASP's size, and whether it's a first offense. These fines can apply to both the legal entity and its responsible officers.
• Remedial Orders: The AFM can issue binding instructions requiring VASPs to take specific actions to rectify deficiencies in their AML/CFT systems and procedures.
• Suspension or Revocation of Licenses/Registrations: For serious or repeated non-compliance, a VASP's operating license or registration may be suspended or revoked, effectively preventing it from conducting business.
• Criminal Liability: In cases of egregious or willful non-compliance, particularly where it facilitates money laundering or terrorist financing, individuals (e.g., executives, compliance officers) may face criminal charges, leading to imprisonment.
• Reputational Damage: Beyond legal penalties, non-compliance can severely damage a VASP's reputation, leading to loss of customer trust and business.

References and Further Information:

• Law of the Republic of Kazakhstan "On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Combating Legalization of Criminal Proceeds (Money Laundering) and Financing of Terrorism" (No. 182-VII dated February 2, 2023): While a direct English link to the full official text can be difficult to find publicly, information about its adoption is widely reported.
• Agency for Financial Monitoring of the Republic of Kazakhstan (AFM): This is the primary regulator and source for official guidance. Their website (afm.gov.kz) would contain relevant information, though often in Kazakh or Russian.
• FATF Mutual Evaluation Reports for Kazakhstan (via EAG): As a member of the Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG), a FATF-style regional body, Kazakhstan is subject to peer reviews. These reports detail their compliance with FATF standards.
  • Eurasian Group (EAG) website: https://www.eurasiangroup.org/en/ (Look for Kazakhstan's mutual evaluation reports)

VASPs operating in Kazakhstan must stay updated with AFM guidance and ensure their compliance programs reflect the latest legislative and regulatory requirements.