Kazakhstan
Overall findings
Kazakhstan’s legal framework implementing the AEOI Standard is not in place in accordance with the requirements of the AEOI Terms of Reference. While Kazakhstan’s international legal framework to exchange the information with all of Kazakhstan’s Interested Appropriate Partners (CR2) is consistent with the requirements, its domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) has significant deficiencies in areas that are fundamental to the proper functioning of the AEOI Standard. Most significantly, Kazakhstan’s legislative framework does not define the categories of Financial Institutions and Financial Accounts in line with the AEOI Standard, does not contain the due diligence requirements in a manner that is binding on Financial Institutions and has an incomplete enforcement framework.
The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.
Conclusions on the legal framework
General context
Kazakhstan commenced exchanges under the AEOI Standard in 2021.
In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, Kazakhstan:
relies on the Law of the Republic of Kazakhstan No 191-IV dated 28 August 2009 (Countering Money Laundering);
introduced Order No. 1429, dated 27 December 2019, as amended by Order No. 344 of 15 April 2021; and
issued Methodological Recommendations on Order No. 1429 (“the Methodology”), which are not binding on Financial Institutions.
Under this framework Reporting Financial Institutions were instructed to commence the due diligence procedures in relation to New Accounts by 1 January 2020, as per the Methodology. With respect to Preexisting Accounts, there is no date specified for the completion of review of High Value Individual Accounts, Lower Value Individual Accounts and Entity Accounts.
With respect to the exchange of information under the AEOI Standard, Kazakhstan has the Convention on Mutual Administrative Assistance in Tax Matters in place and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2021.
Detailed findings
The detailed findings for Kazakhstan are below, organised per Core Requirement (CR) and sub-requirement (SR), as extracted from the AEOI Terms of Reference (see Annex B).
CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.
Kazakhstan’s domestic legislative framework is not in place as required as it does not contain several key aspects of the CRS and its Commentary. Significant deficiencies have been identified in relation to the scope of Reporting Financial Institutions required to report information (SR 1.1), the scope of Financial Accounts required to be reported and the due diligence procedures to be applied (SR 1.2), the information required to be reported (SR 1.3) and the framework to enforce the requirements (SR 1.4). Most significantly, Kazakhstan’s legislative framework does contain some of the key due diligence timelines, does not fully define the categories of Financial Institutions and Financial Accounts, does not include the due diligence requirements in a manner that is binding on Financial Institutions and has incomplete sanctions as part of its enforcement framework.
SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.
Kazakhstan has not defined the scope of Reporting Financial Institutions in its domestic legislative framework in a manner that is consistent with the AEOI Standard and its Commentary as significant deficiencies have been identified. Most significantly, Kazakhstan’s legislative framework:
does not incorporate the definitions of the four categories of Financial Institution, as well as the related definitions from which they derive and the term “Financial Assets” as found in the AEOI Standard; and
does not define Entity, and so will not include legal arrangements as potential Financial Institutions.
The scope of Reporting Financial Institutions, including the specification of Non-Reporting Financial Institutions, is material to the proper functioning of the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to include a definition of Participating Jurisdiction Financial Institution as required by the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to include definitions of Financial Institution, Custodial Institution, Depository Institution, Investment Entity and Specified Insurance Company and the related definitions that are essential to defining Financial Institutions including defining Entity, Financial Assets, Participating Jurisdiction Financial Institution, “managed by” and “passive income” in line with the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to ensure that the residency of a (i) trust that is a Financial Institution and (ii) a fiscally transparent Financial Institution (other than a trust) is determined in accordance with the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to incorporate the requirement that where a Financial Institution (other than a trust) is resident in the implementing jurisdiction and another Participating Jurisdiction, it must carry out the reporting and due diligence obligations in the implementing jurisdiction where it maintains the Financial Account(s).
Kazakhstan should amend its domestic legislative framework to require the term Investment Entity to be interpreted consistently with similar language defining “financial institution” in the Financial Action Task Force Recommendations.
SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.
Kazakhstan has not defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and has not incorporated the due diligence procedures that must be applied to identify them in a manner that is consistent with the AEOI Standard and its Commentary as significant deficiencies have been identified. Crucially, Kazakhstan’s legislative framework has provided for the due diligence procedures in a manner that is not binding on Financial Institutions. Furthermore, Kazakhstan’s domestic legislative framework also has the following significant issues as it:
does not align with the definition of Financial Account in the AEOI Standard and does not incorporate the further definitions for Depository Account, Custodial Account, Equity Interest, Cash Value Insurance Contract and Annuity Contract;
does not include definitions of the terms “Controlling Persons”, “Active NFE”; “Passive NFE”, “Account Holder” and “Related Entity” as required;
does not incorporate the definition of “Documentary Evidence” as required under the AEOI Standard; and
does not include a number of provisions of the due diligence procedures, including specifying the date on which a Preexisting Entity Account is first to be identified.
The scope of Financial Accounts and the due diligence procedures to identify them are material to the proper functioning of the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to include due diligence procedures related to (i) High Value Accounts, (ii) New Individual Accounts, (iii) Pre-existing Entity Accounts and (iv) New Entity Accounts, in a manner that is binding on Financial Institutions.
Kazakhstan should amend its domestic legislative framework to introduce the definitions relevant to Financial Accounts, including the supplementary definitions for Depository Account, Custodial Account, Equity Interest, Cash Value Insurance Contract and Annuity Contract as required by the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to introduce the definitions of (i) Active NFE and (ii) Passive NFE, as required by the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to introduce a definition of passive income, as required by the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to introduce the definition of Account Holder, as required by the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to introduce the definitions of Entity and Related Entity, as required by the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to introduce a definition of Documentary Evidence, as required by the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to introduce a definition of Controlling Persons, in line with the AEOI Standard, along with the requirements in relation to the identification of Controlling Persons, as required by the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to define Excluded Accounts so that the scope does not go beyond that which is permitted by the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to align the definition of Reportable Person to that contained in the AEOI Standard
Kazakhstan should amend its domestic legislative framework to include definitions of (i) New Account, (ii) Preexisting Account, (iii) Lower Value Account and (iv) High Value Account that are in accordance with the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to specify the completion dates for the reviews of: (i) Preexisting High Value Individual Accounts; (ii) Preexisting Lower Value Individual Accounts; and (iii) Preexisting Entity Accounts.
Kazakhstan should amend its domestic legislative framework to ensure that the residence address test is only permitted to be based on Documentary Evidence as defined in the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to ensure that the residence address test is only permitted when based on a “current” residence address as required by the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to ensure that the requirement to base the residence address test on Documentary Evidence is applied in accordance with the Commentary, as required under the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to ensure that the change of circumstances rule is applicable to the residence address test as required by the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to ensure that Reporting Financial Institutions follow the specific procedures if there is a change of circumstance in accordance with the AEOI Standard.
SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.
Kazakhstan has incorporated the reporting requirements in its domestic legislative framework in a manner that is largely consistent with the CRS and its Commentary. However, deficiencies have been identified. More specifically, Kazakhstan’s legislative framework permits the details of an Account Holder to be reported without a TIN, but has not made this subject to the conditions specified in the CRS and does not require Reporting Financial Institutions to use reasonable efforts to obtain the TIN(s) or date of birth of the Account Holder with respect to Preexisting Accounts as required.
The reporting requirements are material to the proper functioning of the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to specify the circumstances under which TINs are permitted not to be reported.
Kazakhstan should amend its domestic legislative framework to require Reporting Financial Institutions to use reasonable efforts, when required, to obtain a TIN or date of birth of a Preexisting Account Holder by the end of the second calendar year following the year in which a Preexisting Account is identified as a Reportable Account.
SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.
Kazakhstan does not have a legislative framework in place to enforce the requirements in a manner that is consistent with the CRS and its Commentary as significant deficiencies have been identified. More specifically, Kazakhstan’s legislative framework:
does not include rules to prevent Financial Institutions, persons or intermediaries from adopting practices intended to circumvent the due diligence and reporting procedures as required;
does not contain provisions imposing sanctions on Account Holders and Controlling Persons for the provision of a false self-certification;
does not provide the relevant authorities with the power to access the records held by Reporting Financial Institutions in relation to the due diligence procedures applied;
does not include rules requiring Reporting Financial Institutions to maintain records in accordance with the AEOI Standard;
does not impose sanctions for failing to carry out the due diligence procedures and failing to keep records as required under the AEOI Standard; and
does not include measures to ensure that valid self-certifications are always obtained for New Accounts.
These are key elements of the required enforcement framework and are therefore material to the proper functioning of the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to include rules to prevent Financial Institutions, persons and intermediaries from adopting practices intended to circumvent the due diligence and reporting procedures.
Kazakhstan should amend its domestic legislative framework to include sanctions on Account Holders and Controlling Persons for the provision of a false self-certification.
Kazakhstan should amend its domestic legislative framework to introduce provisions requiring Reporting Financial Institutions to keep records of the steps undertaken and any evidence relied upon for the performance of the due diligence procedures and to maintain these records for at least five years from the deadline to report the information, in accordance with the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to provide the appropriate authorities with the power to access the records and evidence relevant to verifying and enforcing the AEOI Standard.
Kazakhstan should amend its domestic legislative framework to include sanctions for failure to comply with the due diligence and record keeping requirements.
Kazakhstan should introduce measures to ensure that valid self-certifications are always obtained for New Accounts.
CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.
Kazakhstan’s international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of Kazakhstan’s Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from Kazakhstan and that meet the required standard in relation to confidentiality and data safeguards). (SRs 2.1 – 2.3)
SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.
Kazakhstan has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.
SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.
Kazakhstan put in place its exchange agreements without undue delay.
SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.
Kazakhstan’s exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.