CURRENCY REGULATION
The primary legislative act regulating currency matters in the Republic of Kazakhstan is the Law of the Republic of Kazakhstan On Currency Regulation and Currency Control of 2 July 2018.
The aforementioned Law regulates all civil relations associated with any currency transactions and arising in connection with the exercising of residents’ and nonresidents’ rights to currency valuables. Besides, the Law determines the goals, objectives and procedures of currency regulation and currency control. This Law applies to Kazakhstan residents outside the Republic of Kazakhstan as well.
The principal currency regulator in Kazakhstan is the National Bank of the Republic of Kazakhstan.
The following persons are recognised as residents of the Republic of Kazakhstan for the purpose of currency regulation and control:
• all citizens of the Republic of Kazakhstan (except for those who permanently reside in a foreign state) wherever located;
• all foreign nationals and stateless persons who hold the right to permanently reside in the Republic of Kazakhstan (i.e. a residence permit);
• all legal entities (except foreign organisations) incorporated under the laws of the Republic of Kazakhstan and having their registered offices in the Republic of Kazakhstan, as well as branches and representative offices thereof;
• any international organisation having an office in the Republic of Kazakhstan, provided that the international treaty on the establishment of such organisation determines its residency status;
• all foreign missions of the Republic of Kazakhstan;
• all branches/representative offices of foreign non-financial organisations which are deemed, in accordance with the Kazakhstan Code On Taxes and Other Obligatory Payments to the Budget (Tax Code), to be permanent establishments of such foreign non-financial organisations in the Republic of Kazakhstan, except those which are recognized as nonresidents of the Republic of Kazakhstan (please see below); and
• branches of foreign financial organisations which may, under Kazakhstan law, undertake banking and/or insurance business in the Republic of Kazakhstan.
Nonresidents include:
• foreign nationals and stateless persons (except for those who have a document granting the right to permanently reside in the Republic of Kazakhstan, i.e. a residence permit);
• citizens of the Republic of Kazakhstan holding a document granting the right to permanently reside in a foreign state;
• all legal entities incorporated under the laws of foreign jurisdictions and based outside the Republic of Kazakhstan, as well as branches and representative offices thereof in the Republic of Kazakhstan, whose activities do not create a nonresident’s permanent establishment in the Republic of Kazakhstan under the Kazakhstan Code On Taxes and Other Obligatory Payments to the Budget (Tax Code);
• all branches/representative offices of foreign non-financial organisations which are deemed to be nonresidents for the purpose of Kazakhstan currency regulations in accordance with the treaties between such organisations and the Republic of Kazakhstan [note: such branches/ representative offices are listed by a special act of the Kazakhstan Government];
• international organizations, unless otherwise provided for by international (intergovernmental) treaties on their establishment; and
• diplomatic and other official representations of foreign states.
Currency transactions include:
• transactions implying the transfer of ownership and other rights to currency valuables and the use of currency valuables as means of payment; and
• import, transfer and remittance to the Republic of Kazakhstan, as well as export, transfer and remittance from the Republic of Kazakhstan, of any currency valuables;
• transfer of currency valuables to trust management; and
• transfer of currency valuables under brokerage services agreements.
Currency valuables include:
• foreign currency;
• securities and payment documents denominated in foreign currency;
• unvalued securities issued by nonresidents;
• refined gold in bars;
• national currency of the Republic of Kazakhstan, securities and payment documents denominated in the national currency of the Republic of Kazakhstan, if used in transactions between residents and nonresidents or between nonresidents, and if exported (remitted) out of Kazakhstan or imported (remitted) to Kazakhstan; and
• unvalued securities issued by residents, if used in transactions between residents and nonresidents or between nonresidents, and if imported out of Kazakhstan or imported to Kazakhstan.
Any and all foreign exchange cash transactions undertaken by designated institutions or banks are subject to licensing in the Republic of Kazakhstan. Licenses are issued by the National Bank of the Republic of Kazakhstan.
All currency transactions are monitored by the National Bank by the following means:
1) record registration of foreign currency contracts:
Record registration is mandatory for all foreign currency contracts that provide for and/or result in capital flows between residents and nonresidents, in particular:
(1) financial loans, in particular:
• loans, except liabilities arising from advance, deferred or staggered payments for exported or imported goods;
• funds pledged as collateral to secure the performance of debtor’s obligations;
• factoring arrangements (a type of financing in which a business sells its accounts receivable (i.e. invoices) to a third party);
• third party procurement of goods/works/services, third party funding of transactions, and third party performance of debtor’s obligations to creditors giving rise to the obligation on the part of the debtor to return funds and other assets to the party providing such funding and/or performing such obligations;
• financial leasing and letting of real estate with buy-back option, except for movable property equated or ascribed by Kazakhstan law to real estate;
(2) capital subscriptions, in particular:
• participation in the authorized capital or assets of a legal entity, simple partnership or consortium, including participation in the form of shares, participatory interests, contributions and/or votes;
• participation in a legal entity’s capital, other than the authorised capital thereof;
(3) transactions in securities, interests and derivatives;
(4) acquisition of a title to real estate (except for movable property equated or ascribed by Kazakhstan law to real estate and transactions undertaken by resident individuals);
(5) acquisition of exclusive intellectual property rights (except acquisition of exclusive rights to any results of intellectual and creative activities);
(6) transfer of cash and other assets in discharge of a joint operator’s obligation, and transfer of cash and other assets under discretionary/trust management agreements;
(7) transfer of cash and financial instruments to securities market professional traders who transact on behalf of their clients and put clients’ cash and financial instruments into their operating or suspense accounts; and
(8) gratuitous transfer of cash and other currency valuables (except for transactions undertaken by resident individuals).
The threshold value of foreign currency contract qualifying for such record registration is minimum 500,000 US dollars, regardless of whether a foreign currency contract provides for import/export of cash/assets into/from Kazakhstan, or creates the obligation on the part of a resident to return cash/assets to a nonresident, or gives rise to a resident’s claim for recovery of cash/assets from a nonresident;
2) reporting of foreign currency transactions:
Licensed forex banks must report their foreign currency transactions to the Kazakhstan National Bank in a written form containing the information received upon conduction of relevant payment and/or remittance transactions.
The threshold amount of such foreign exchange cash payment and/or remittance under a foreign currency transaction to be reported by a licensed forex bank to the Kazakhstan National Bank is minimum 50,000 US dollars;
3) reporting of foreign bank accounts:
The obligation to report foreign bank accounts to the Kazakhstan National Bank (who assigns registration numbers thereto) is imposed only on corporate residents (except for banks and branches/representative offices of foreign organisations). Individual residents’ transactions associated with the remittance of cash from their own foreign bank accounts to Kazakhstan licensed forex bank accounts (or vice versa) are reported to the Kazakhstan National Bank by the licensed forex bank performing such transactions; and
4) regular updates from branches/representative offices of foreign non-financial organisations:
All branches/representative offices of foreign non-financial organisations which have been operating in Kazakhstan for over a year and are listed by the Kazakhstan National Bank (please see the list below) must report to the Kazakhstan National Bank any and all transactions with residents and nonresidents in the prescribed form. Such list of the National Bank includes all branches/representative offices engaged in the following activities:
• production of crude oil, natural and associated gas;
• construction services;
• mining-related services;
• architectural, engineering and other technical services; and
• scientific research and development.
Foreign currency transactions between residents are prohibited, unless otherwise explicitly provided for by Kazakhstan law.
Foreign currency transactions between nonresidents within the Republic of Kazakhstan may be performed without any restriction other than in the event of a special currency regime introduced in the Republic of Kazakhstan. A special currency regime is applied as a measure of last resort in the event of threats to the economic security of the Republic of Kazakhstan and stability of its financial system, when the situation cannot be cured by other economic policy measures. The duration of a special currency regime may not exceed 1 year.
Foreign currency transactions between residents and nonresidents are not restricted, provided that they meet the aforementioned currency monitoring requirements.
Residents and nonresidents may sell and buy foreign currency in the Republic of Kazakhstan only from and to the banks licensed to perform foreign currency exchange transactions through currency exchange offices of such licensed banks and currency exchange offices of licensed organizations.
Resident and nonresident individuals may export foreign and national currency in the form of cash (except precious metal coins) and traveller’s cheques from the Republic of Kazakhstan in the amounts not exceeding the equivalent of 10,000 US dollars without submitting a customs declaration form or any other document confirming the origin of the exported foreign cash. When the US$10,000 threshold is exceeded, the resident/nonresident individual importing/exporting such foreign or national currency in the form of cash (except precious metal coins) or traveller’s cheques to/from Kazakhstan must fill out a separate customs declaration, unless they import/export the cash/traveller’s cheques to/from a Eurasian Economic Union member state.
Import/export currency control
The objective of the import/export currency control is to make sure that exporters and importers comply with Kazakhstan regulations on repatriation of foreign currency and/or national currency of the Republic of Kazakhstan implying the crediting of authorised bank accounts with:
1) export proceeds in national and/or foreign currency ; and
2) national and/or foreign currency cash transferred by a resident in favour of a nonresident for the purpose of settlements under an import contract when the nonresident fails to perform or incompletely performs their contractual obligations.
Export means a transfer of goods from a Kazakhstan resident to a Kazakhstan nonresident, or a partial transfer of exclusive intellectual property rights from a Kazakhstan resident to a Kazakhstan nonresident, or performance of works, provision of services and lease of assets by a Kazakhstan resident in favour of a Kazakhstan nonresident.
Import means a transfer of goods from a Kazakhstan nonresident to a Kazakhstan resident, or a partial transfer of exclusive intellectual property rights from a Kazakhstan nonresident to a Kazakhstan resident, or performance of works, provision of services and lease of assets by a Kazakhstan nonresident in favour of a Kazakhstan resident.
A resident must fulfil the requirement for repatriation of national or foreign currency within the repatriation time period; therefore, the relevant currency contract should determine the term for discharge of liabilities on the part of the nonresident.
Licensed banks, as well as local branches of the Kazakhstan National Bank, monitor whether foreign currency export/import contracts exceeding the US$50,000 threshold meet the repatriation requirements. Such foreign currency contracts are subject to record registration. Please note that those contracts with nonresidents which do not imply the movement of goods across the Kazakhstan border do not require a registration number.
Financial Monitoring
The Republic of Kazakhstan performs financial monitoring aimed at countering the legalisation (laundering) of illegal proceeds and the financing of terrorism. According to Kazakhstan Law On Combating Legalization (Laundry) of Criminal Proceeds and Financing of Terrorism No. 191-IV of 28 August 2009, the subjects of financial monitoring include the following:
1) banks, Kazakhstan branches of nonresident banks and organizations performing certain types of banking operations, except for the operator or operation centre of an interbank money transfer system;
2) exchanges;
3) insurance (reinsurance) organizations, insurance brokers, mutual insurance associations, Kazakhstan branches of nonresident insurance/reinsurance companies and Kazakhstan branches of insurance brokers;
4) the unified pension savings fund and voluntary pension savings funds;
5) professional securities market participants and the central depository;
6) notaries performing notarial acts with respect to money and/or other property;
7) attorneys, legal advisors and other independent experts on legal matters when they participate, for and on behalf of their clients, in transactions involving cash and/or other assets in connection with the following activities:
• sale and purchase of immovable property;
• management of cash, securities and other assets for and on behalf of a client;
• management of bank accounts or securities accounts;
• accumulation of funds for establishment, operation or management of a company;
• establishment, sale and purchase, operation or management of legal entities;
8) accounting firms and professional accountants engaged in accounting business, and audit firms;
9) gambling businesses and lottery organizers;
10) postal service operators providing money transfer services;
11) institutions providing microfinance services;
12) payment organisations;
13) individual entrepreneurs and legal entities engaged in leasing activities as unlicensed lessors;
14) individual entrepreneurs and legal entities transacting in precious metals and precious gems, as well as jewellery made thereof;
15) individual entrepreneurs and legal entities providing agency services in connection with real estate sale and purchase transactions;
16) social health insurance fund; and
17) members of the Astana International Financial Centre (AIFC) conducting certain activities in the AIFC as determined by the Astana Financial Services Authority (AFSA).
The subjects of financial monitoring are responsible for due diligence of their customers/agents and beneficiary owners when:
1) they establish business relations with a customer; and/or
2) they perform any transactions with cash and/or other assets subject to financial monitoring, including suspicious transactions.
The financial monitoring requirement applies to the following transactions with cash and/or other assets:
1) receipt of betting, gambling or lottery awards, including in electronic form, amounting to minimum 3,000,000 tenge (or its equivalent in foreign currency);
2) pawnshop transactions in cash, securities, precious metals/stones and products made thereof, and other valuables (except national coins made of precious metals) consummated on a cash or non-cash basis and amounting to minimum 3,000,000 tenge (or its equivalent in foreign currency);
3) remittances to foreign current or deposit accounts opened by anonymous beneficiaries, or receipt of funds from foreign current or deposit accounts opened by anonymous holders, by wire transfer or otherwise, amounting to minimum 5,000,000 tenge (or its equivalent in foreign currency);
4) sale and purchase of precious metals/stones and products made thereof on a cash basis amounting to minimum 5,000,000 tenge (or its equivalent in foreign currency);
5) credit or transfer of cash to customers’ bank accounts by individuals or corporations registered, residing or domiciled, respectively, in offshore jurisdictions and holding accounts with banks registered in offshore jurisdictions, or transacting with such individuals/corporations in money and/or other assets on a cash or non-cash basis for amounts minimum 5,000,000 tenge (or its equivalent in foreign currency);
6) gratuitous payments and transfers of cash by customers in favour of third parties, either by wire transfer or otherwise, in amounts minimum 7,000,000 tenge (or its equivalent in foreign currency);
7) transactions in shares/units of mutual investment funds, except repo transactions through open bidding in a regulated market, on a cash or non-cash basis, in amounts minimum 7,000,000 tenge (or its equivalent in foreign currency);
8) foreign currency sale, purchase and exchange via exchange offices, on a cash basis, in amounts minimum 10,000,000 tenge (or its equivalent in foreign currency);
9) collection of a cheque or promissory note, on a cash basis, in amounts minimum 10,000,000 tenge (or its equivalent in foreign currency);
10) withdrawal/placement of cash from/to customers’ bank accounts, as well as receipt/disbursement of cash from/to customers, unless otherwise provided for by paragraphs 13) and 14) below, in amounts minimum 10,000,000 tenge (or its equivalent in foreign currency);
11) cash or non-cash transactions by a legal entity within less than 3 months from the date of its state registration for amounts of minimum 10,000,000 tenge (or its equivalent in foreign currency);
12) import/export (other than import/export by the Kazakhstan National Bank, banks and the National Post Service Operator) to/from the Republic of Kazakhstan of cash, documentary securities payable to bearer, promissory notes or cheques for amounts of minimum 10,000,000 tenge (or its equivalent in foreign currency);
13) payment/receipt of insurance benefits/premiums (cash only basis) in amounts minimum 10,000,000 tenge (or its equivalent in foreign currency);
14) remittance/transfer (cash only basis) of voluntary pension cash contributions to the unified pension savings fund and/or voluntary pension savings fund and pension cash payments from the unified pension savings fund and/or voluntary pension savings fund in amounts minimum 10,000,000 tenge (or its equivalent in foreign currency);
15) cash transactions involving provision of services, including contractor services, transportation, freight forwarding, storage, commissioning and trust management of assets, except for services implying the lease of safety deposit boxes/chests/rooms, for amounts minimum 10,000,000 tenge (or its equivalent in foreign currency);
16) sale and purchase, on a cash basis, and import/export to/from the Republic of Kazakhstan of cultural valuables the value of which is minimum 45,000,000 tenge (or its equivalent in foreign currency);
17) acquisition or lease of assets under finance leases, on a cash basis, the value of which is minimum 45,000,000 tenge (or its equivalent in foreign currency);
18) cash or non-cash transactions with bonds and government securities, except for repo transactions in a regulated market through open bidding, for amounts minimum 45,000,000 tenge (or its equivalent in foreign currency);
19) cash or non-cash transactions consummated by borrowers under business financing programmes funded by the National Fund of the Republic of Kazakhstan in the form of bond-secured loans to quasi-government organisations amounting to minimum 50,000,000 tenge (or its equivalent in foreign currency);
20) foreign currency transactions classified as cross-border payments or withdrawal/placement of cash from/to customers’ bank accounts by wire transfer in amounts of minimum 100,000,000 tenge (or its equivalent in foreign currency); and
21) real estate transactions resulting in the transfer of title to such real estate the value of which is minimum 200,000,000 tenge (or its equivalent in foreign currency).
Moreover, suspicious transactions are subject to financial monitoring regardless of the mode of their performance and the amounts that are paid or may/might be paid under such transactions. The term “suspicious transaction” means any customer’s transaction (including an attempted transaction in progress or completed transaction) raising suspicions that the cash and/or other assets used for its implementation are criminal proceeds, or a transaction intended to legalize/launder criminal proceeds or to finance terrorism or any other criminal activities. The signs/criteria of a suspicious transaction are determined and adopted by the Kazakhstan Government.
The subjects of financial monitoring may review customer’s transactions and may record the results of such review only when:
1) the customer consummates a complicated, unusually large transaction with cash and/or other assets without apparent economic substance or obvious legitimate objective;
2) the customer pursues actions aimed at avoiding certain due diligence and/or financial monitoring procedures;
3) there are grounds to believe that a certain cash and/or other asset transaction of the customer is intended to cash criminal proceeds; and
4) a cash and/or other asset transaction involves a party incorporated/residing in a state/territory which does not follow or not properly follows the recommendations of the Financial Action Task Force on Money Laundering (FATF) and using accounts in banks incorporated in such state/territory.
The list of states/territories not complying and/or insufficiently complying with the FATF recommendations is compiled by competent authorities on the basis of the documents issued by FATF.
No information or data on a transaction subject to financial monitoring shall be disclosed by attorneys who receive such information and data in connection with legal advice provided in the course of representation and protection of individuals and legal entities in front of interrogation authorities, pre-trial investigation authorities and courts, as well as in connection with legal support in the form of advice, clarification, consultation and written opinion with regard to the issues requiring professional legal expertise, and for the purpose of drafting claims, appeals and other legal documents.