Uzbekistan Tightens Banking Controls

Uzbekistan Tightens Banking Controls

Thursday, 19 November, 2009
Tighter controls on bank transactions in Uzbekistan are officially all about preventing money laundering and the funding of terrorism, but locals fear it will lead to greater intrusions into their private accounts.

The new regulations, which stem from changes to legislation on money laundering and terrorist funding dating from April,

came into effect for commercial banks on November 2. All banks are introducing internal systems to track transactions and report suspicious money flows to the prosecution service.

The authorities are concerned at the spread of Islamic extremism in recent years, particularly in the shape of the Hizb ut-Tahrir group and the Islamic Movement of Uzbekistan. These concerns grew after attacks that targeted police in and around the eastern city of Andijan in late May.

Bank account holders are concerned that confidential information about the transactions they conduct will be shared with government and used against them.

Non-government groups, in particular, fear the regulations will provide a mechanism with to block transactions and prevent them operating.

“Our projects are often supported by foreign grants, and now I’m not sure we are going to be able to work unhindered,” said Abdurahmon Tashanov of the Ezgulik human rights group, which has branches across Uzbekistan.

Many NGOs working on women’s rights, environmental issues and human rights are already under surveillance because the authorities suspect them of disloyalty since they receive grants from donors abroad.

One local observer pointed out that the prosecution service already has an arm tasked with monitoring financial flows.

“Why do we need another supervisory body?” he asked.

Tashanov fears that the financial controllers will focus their attentions on freelance journalists, human rights activists and other independent-minded figures who occasionally receive grants and awards from abroad.

“They [the authorities] have acquired another tool with which to put more pressure on our work, and they will use it to exert greater control over our activities,” he said.

Even if the measures help curb money laundering, they will also reduce bank deposits as people place their savings elsewhere to stop information being leaked to the authorities.

“Who would want to have all their money under the scrutiny of the authorities, law-enforcement officers in particular?” asked Abdusalom Ergashev, an expert from Fergana. “Not only businessmen but also ordinary people will avoid opening bank accounts and depositing large sums of money there.”

Some say that has happened already, and anyone with serious money now holds it safely abroad as they do not trust domestic banks.

“Four or five years ago, many of my friends realised they could not keep their money in Uzbek banks,” said a businessman in Tashkent. “They bought properties abroad and invested money in businesses in Russia and Kazakstan. In Uzbekistan, you never know what will happen to you tomorrow.”

(NBCentralAsia is an IWPR-funded project to create a multilingual news analysis and comment service for Central Asia, drawing on the expertise of a broad range of political observers across the region. The project ran from August 2006 to September 2007, covering all five regional states. With new funding, the service has resumed, covering Uzbekistan and Turkmenistan.)

Support our journalists