Law of Mongolia on Regulation and Prevention of Conflicts of Interest for Public Service enacted on 19 January 2012 (the “Law on Conflicts of Interest”) was amended on 13 April 2017 adding Article 101 which prohibits public officers who file their income or property declaration under Article 4.1 of the Anti-Corruption Law and their affiliates from holding bank accounts, owning movable or immovable property, or establishing legal entities by contributing as a shareholder in the countries and territories designated as offshore financial territories (the “Offshore Countries and Territories”) during the tenure.
Exception applies to such prohibition if the public officer has opened a bank account, has placed a monetary fund in the account, has owned a movable or immovable property in the Offshore Countries and Territories while he/she has been studying, receiving a medical service or aid, or exercising his/her official duty imposed by laws.
Public officers who are elected according to the requirements set forth in law or appointed through an election and their affiliates have to take the following measures within 3 months after such election or appointment if he/she opened bank accounts, placed monetary funds in such accounts, owned movable or immovable property, or established legal entities by contributing as a shareholder in the Offshore Countries and Territories:
- To close the bank account;
- To repatriate all the monetary fund;
- To sell, transfer, or depose the ownership of movable or immovable property;
- Liquidate the legal entity in which he/she holds a share or sale, transfer, terminate the ownership right in such legal entity.
Public officials who are subject to the Law on Conflicts of Interest must declare to the Independent Authority Against Corruption of Mongolia within 30 days after taking the above measures.
Under the Law on Conflicts of Interest, the Government of Mongolia is to adopt a list of the Offshore Countries and Territories based on the proposal delivered by the Bank of Mongolia and the Ministry of Finance, and by taking into account the list adopted by international economic, banking or financial organizations. The Government of Mongolia, through its Resolution No. 244 of 31 August 2017 has designated 49 countries and territories as offshore financial territories. (Please see the list of the Offshore Countries and Territories below). This list is to be updated from time to time depending on the list designating offshore territories as approved by international economic, banking or financial organizations.
The Law on Conflicts of Interest is aimed to prevent public officials from having conflict of interests between their official duty and their personal interests; thus, the prohibition stated above only applies to private individuals or legal entities who are not subject to Article 4.1 of the Anti-Corruption Law and not bound by the Law on Conflicts of Interest.
Also, it is not clear from the wording of the new Article 101 of the Law on Conflicts of Interest whether “… establishing legal entities by contributing as a shareholder” means not to establish/incorporate legal entities in the Offshore Countries or Territories, or generally prohibits from holding any shares in legal entities established in the Offshore Countries and Territories. Under the general principle of the Law on Conflicts of Interest of preventing any conflict of interest of public officials, it can be assumed that this provision would apply to owning shares in a legal entity established in the Offshore Countries and Territories even if such public official did not establish/incorporate the company itself.
However, please note that these legal observations are not official interpretations of the law.
List of the countries and territories designated as offshore financial territories:
BATTUSHIG.B, Partner (firstname.lastname@example.org, tel+976 331020)
SUVD.T, Paralegal (email@example.com, tel+976 331020)