Uzbekistan -- Sanctions Compliance Regulatory Overview

Uzbekistan has established a legal framework for the regulation of cryptocurrencies and virtual asset service providers (VASPs), primarily through the National Agency for Perspective Projects (NAPP). Compliance with Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations is a cornerstone of this framework, which inherently includes sanctions compliance.

While Uzbekistan does not issue its own crypto-specific international sanctions lists comparable to OFAC or EU, its national legislation and VASP regulations mandate compliance with international standards, which include UN sanctions, and implicitly require VASPs with international operations or client bases to be aware of and comply with relevant foreign sanctions regimes (like OFAC and EU) that apply to their activities.

Here's a breakdown of the cryptocurrency sanctions and restrictions in Uzbekistan:

1. Uzbekistan's Regulatory Framework for Cryptocurrencies

Uzbekistan has embraced blockchain and crypto technology but with a robust regulatory environment. Key legal acts include:

• Decree of the President of the Republic of Uzbekistan No. DP-4952 of September 2, 2018 "On Measures for the Development of the Digital Economy in the Republic of Uzbekistan": This decree initially established the legal framework for blockchain technology and created the NAPP (then the National Agency for Project Management under the President).
• Decree of the President of the Republic of Uzbekistan No. DP-196 of April 27, 2022 "On Measures for the Regulation of Activities in the Sphere of Circulation of Virtual Assets": This decree further strengthened the regulatory framework, designating NAPP as the sole authorized body for regulating virtual asset circulation. It explicitly mandates licensing for VASPs and imposes AML/CTF obligations.
  • Link to Decree DP-196 (Russian, often official sources are in Uzbek or Russian): Lex.uz (You may need to search the Lex.uz database if the direct link changes)
• Regulations on the Procedure for Licensing of Activities of Virtual Asset Service Providers (NAPP, Registered by the Ministry of Justice No. 3416 on 12.01.2023): These regulations outline the requirements for obtaining a license, including significant capital requirements and strict compliance obligations for VASPs.
  • Link to NAPP website, often contains regulatory documents: NAPP Official Website (Look for sections on "Regulation of Virtual Assets" or "Legislation")
• Regulations on the Procedure for Implementing Measures to Combat Legalization of Proceeds from Criminal Activities, Financing of Terrorism and Financing of Proliferation of Weapons of Mass Destruction for Virtual Asset Service Providers (NAPP, Registered by the Ministry of Justice No. 3415 on 12.01.2023): This is the most crucial document regarding AML/CTF and sanctions compliance for VASPs.
  • Link to NAPP website, often contains regulatory documents: NAPP Official Website (Look for sections on "Regulation of Virtual Assets" or "Legislation")

2. OFAC/EU/UN Sanctions Compliance Requirements for VASPs in Uzbekistan

Uzbekistan's national AML/CTF framework is designed to align with international standards, particularly those set by the Financial Action Task Force (FATF).

• UN Sanctions:

  • As a member state of the United Nations, Uzbekistan is legally bound to implement UN Security Council resolutions, including those imposing targeted financial sanctions against individuals and entities involved in terrorism, proliferation of weapons of mass destruction, and other illicit activities.
  • Uzbekistan's Law "On Combating Legalization of Proceeds from Criminal Activities, Financing of Terrorism and Financing of Proliferation of Weapons of Mass Destruction" (No. ZRU-656 of December 21, 2020) serves as the overarching national legal framework for AML/CTF, directly incorporating the obligation to implement UN sanctions.
    • Link to Law ZRU-656 (Russian): Lex.uz
  • The NAPP Regulations for VASPs explicitly mandate that VASPs establish internal control rules and procedures to comply with this law, which includes screening against UN sanctions lists (e.g., the ISIL (Da'esh) & Al-Qaida Sanctions List, the Taliban Sanctions List, and other UN sanctions lists).

• OFAC/EU Sanctions (Indirect but Crucial):

  • While Uzbek law does not directly enforce OFAC (U.S. Department of the Treasury's Office of Foreign Assets Control) or EU sanctions, any VASP operating in Uzbekistan that:
    • Has a U.S. nexus (e.g., U.S. customers, U.S. dollar transactions, servers in the U.S., employees in the U.S., U.S. investors).
    • Has an EU nexus (e.g., EU customers, Euro transactions, operations in the EU).
    • Engages with international partners (banks, other VASPs) that are subject to OFAC or EU jurisdiction.
    • Uses U.S. dollar-denominated financial services.
  • ...is effectively obligated to comply with OFAC and EU sanctions to avoid severe penalties from those jurisdictions.
  • Therefore, a prudent VASP in Uzbekistan, especially one with international aspirations or clientele, must implement robust screening against OFAC's SDN List and other sanctions lists, as well as the EU Consolidated List of persons, groups, and entities subject to financial sanctions.
  • OFAC Resources:
    • SDN List: OFAC SDN List
    • OFAC Guidance for the Virtual Currency Industry: OFAC Guidance
  • EU Sanctions Resources:
    • EU Consolidated List: EU Sanctions Map (Includes links to consolidated lists)
    • EU Financial Sanctions Factsheet: EU Factsheet

3. Sanctioned Entity Screening Obligations

Uzbek VASPs are subject to stringent customer due diligence (CDD) and enhanced due diligence (EDD) requirements, which explicitly include screening for sanctions.

• NAPP Regulations for VASPs (No. 3415): These regulations mandate that VASPs:
  • Identify and verify the identity of their clients (and beneficial owners).
  • Conduct ongoing monitoring of business relationships.
  • Screen clients and beneficial owners against national and international sanctions lists (including UN lists).
  • Report suspicious transactions to the Department on Combating Economic Crimes under the Prosecutor General's Office of the Republic of Uzbekistan (Uzbekistan's Financial Intelligence Unit or FIU).
  • Freeze assets of individuals and entities on designated sanctions lists without delay.
• Specific Screening Requirements:
  • Identification of Parties: VASPs must identify all parties involved in a virtual asset transaction (originator and beneficiary).
  • Risk-Based Approach: VASPs must apply a risk-based approach to CDD, with EDD required for high-risk customers, politically exposed persons (PEPs), and transactions involving high-risk jurisdictions or activities.
  • Beneficial Ownership: Identification and verification of beneficial owners are critical.
  • Ongoing Monitoring: Continuous monitoring of transactions and customer profiles for any changes or red flags, including updates to sanctions lists.

4. Geographic Restrictions

Uzbekistan's domestic crypto regulations do not explicitly list geo-restrictions on crypto transactions beyond those implied by their AML/CTF obligations. However, a VASP operating in Uzbekistan must abide by:

• UN Sanctions-related Restrictions: Prohibiting transactions with individuals, entities, and sometimes regions subject to UN asset freezes or other prohibitions.
• OFAC/EU Sanctions-related Restrictions: For VASPs with an international nexus, this means avoiding transactions or services to jurisdictions under comprehensive sanctions (e.g., Crimea, certain regions of Ukraine, Cuba, Iran, North Korea, Syria, Venezuela) and entities/individuals located in or linked to those jurisdictions, as specified by OFAC and EU regulations.
• Internal Risk Management: VASPs often implement their own geographic restrictions based on their risk appetite, internal policies, and the regulatory demands of all jurisdictions they operate in or serve.

5. Penalties for Violations

Violations of AML/CTF and sanctions compliance in Uzbekistan can lead to severe penalties, both administrative and criminal.

• Under Uzbekistan National Law:
  • Administrative Responsibility: The Code of Administrative Responsibility (e.g., Article 170-2 "Violation of the procedure for conducting operations with virtual assets" or general AML/CTF violations) can impose significant fines on legal entities and officials.
  • Criminal Responsibility: The Criminal Code of the Republic of Uzbekistan (e.g., Article 243 "Legalization of proceeds from criminal activities," Article 252-1 "Illegal circulation of virtual assets" - though the latter primarily pertains to unlicensed operations) can impose substantial fines, imprisonment, or asset forfeiture for serious breaches, especially those related to money laundering or terrorist financing.
  • NAPP Sanctions: NAPP, as the licensing body, has the power to:
    • Issue warnings.
    • Impose fines specific to licensing violations.
    • Suspend or revoke a VASP's license for non-compliance with licensing conditions or AML/CTF obligations.
• Under OFAC/EU Sanctions (for internationally exposed VASPs):
  • OFAC: Can impose civil monetary penalties of millions of dollars per violation, and in severe cases, criminal charges leading to imprisonment for individuals and larger fines for entities. Assets can also be blocked indefinitely.
  • EU: Member states implement EU sanctions, and penalties vary but can include significant fines, imprisonment, and asset freezes.

6. Country-Specific Sanctions Lists in Uzbekistan (for Crypto)

• Uzbekistan does not maintain a publicly available "crypto-specific" sanctions list.
• However, in addition to implementing UN sanctions lists, Uzbekistan maintains national lists of individuals and entities involved in terrorism and extremism, often managed by its security services and the FIU. These national lists are critical for VASPs' AML/CTF screening processes within Uzbekistan.
  • Information on specific national terrorist lists might not be publicly accessible in its entirety due to security considerations, but VASPs are expected to have access or receive guidance from regulatory bodies (NAPP, FIU) on how to screen against these.

In conclusion, any VASP operating in Uzbekistan must establish a comprehensive compliance program that includes robust AML/CTF procedures, specifically incorporating:

1. Screening against UN sanctions lists as mandated by Uzbek law.
2. Screening against Uzbekistan's national lists of individuals/entities involved in terrorism/extremism.
3. For any VASP with an international footprint, mandatory screening against OFAC (SDN List) and EU (Consolidated List) sanctions lists to mitigate extraterritorial risks.
4. Implementing a risk-based approach to customer due diligence, transaction monitoring, and geographic restrictions.
5. Having clear procedures for reporting suspicious transactions and freezing assets as required by law.