The 2024 International Narcotics Control Strategy Report by the U.S. Department of State highlights persistent vulnerabilities in Turkmenistan’s fight against money laundering and financial crimes. Despite being a relatively isolated economy and not a regional financial hub, Turkmenistan faces serious challenges related to financial transparency, offshore wealth holdings, and weak enforcement of anti-money laundering (AML) standards.
Turkmenistan has taken steps to identify and mitigate risks of money laundering and terrorist financing, but implementation remains weak. The country’s financial system is small, consisting of the Central Bank and eight domestic banks, with Deutsche Bank previously serving as a key international partner. However, Deutsche Bank has suspended some correspondent banking relationships due to Turkmen banks’ insufficient anti-money laundering and combating the financing of terrorism (AML/CFT) compliance.
Government opacity and lack of access to reliable financial data obscure the full scope of money laundering. Turkmen officials and their families are known to maintain offshore accounts, but little public information is available about these holdings. The country’s dual exchange rate system and currency conversion restrictions further limit financial transparency.
Money Laundering Risks and Methods
Turkmenistan’s shared borders with Afghanistan and Iran increase the risk of illicit financial flows, potentially tied to narcotics trafficking and corruption. While there is no direct evidence linking Turkmen banks to drug money laundering, smuggling of goods such as fuel and tobacco remains a concern. The continued introduction of cashless payments and digital banking tools may help reduce laundering opportunities, though adoption remains limited.
The country has not moved to regulate or facilitate the use of virtual currencies but has expressed interest in studying their implications.
Regulatory and Institutional Gaps
Turkmenistan’s AML framework includes due diligence and suspicious transaction reporting (STR) rules. The Financial Monitoring Service (FMS), under the Ministry of Finance and Economy, serves as the financial intelligence unit (FIU) and is part of the Egmont Group and the Eurasian Group on AML/CFT. However, its reporting is often delayed and lacks actionable insights.
Key legal and enforcement shortcomings include:
- No verification of beneficial ownership information;
- A definition of politically exposed persons (PEPs) does not comply with international standards and it excludes close associates and foreign officials;
- No centralized management or international sharing of confiscated assets;
- Insufficient investigative capacity and inter-agency coordination.
Turkmenistan also lacks a mutual legal assistance treaty with the United States, hindering cross-border cooperation in financial investigations.
Overall, to build an effective and credible financial system, Turkmenistan must improve regulatory enforcement, enhance transparency, and establish clear mechanisms for international cooperation.
