(2022.12.22-ны өдрийн орчуулга)     Unofficial translation

LAW ON CURRENCY REGULATION

 May 12, 1994                                    Ulaanbaatar city

CHAPTER ONE

 GENERAL PROVISIONS

Article 1.Purpose of this law

1.The purpose of this law is to define the powers of the Government bodies in charge of currency settlement, and regulate relations concerning currency transactions by business entities, organizations and citizens and to control currency transactions and to protect the Mongolian currency from inflation.

Article 2.Legislation on currency settlements

1.The legislation on currency settlements is comprised of the Constitution of Mongolia, this law, and other legislative acts issued in conformity with them.

2.If an international treaty to which Mongolia is a party is inconsistent with this law, then the provisions of the international treaty shall prevail.

Article 3.Definitions

1."Currency" shall mean the national currency of Mongolia, foreign currencies, gold currencies, precious reserves and payout units used for payment in inter-governmental trade and economic relations.

2."National currency" shall mean the tugrug-that is the solvent currency of Mongolia in transactions, securities and other payment instruments, commonly used in international transactions expressed in tugrugs.

3."Foreign currencies" shall mean solvent foreign currencies in transactions, securities, and instruments of payment commonly used in international transactions expressed in foreign currencies. Foreign currencies shall be internationally accepted and divided into two categories: freely convertible and non-convertible.

4."Gold currency" shall mean gold purified in accordance with the international standards, held in any international financial centres, and got ready to sale for foreign currency.

5."Precious reserves" shall mean precious stones and metals similar to gold currency.

6."Purified gold' shall mean gold which has been purified to add to the quality of gold but which has not satisfy conditions of sale for foreign currency.

7.Permanent residents involved in currency settlements (hereinafter referred to as 'permanent residents') shall be:

1/individuals, who permanently reside in Mongolia and persons who are permanent residents of Mongolia but who are traveling abroad for not more than 183 days;

2/business entities in Mongolia incorporated in accordance with the legislation of Mongolia and domiciled in Mongolia, and their branches and representative offices in foreign countries; and

3/Mongolian diplomatic missions in foreign countries.

8.Temporary residents involved in currency settlements (hereinafter referred to as "temporary residents") shall be:

1/individuals who reside permanently outside of Mongolia, and who are resident in Mongolia for not more than 183 days;

2/business entities incorporated in accordance with the legislation of a foreign country and have not been domiciled in Mongolia, and their branches and representative offices in Mongolia; and

3/foreign diplomatic mission and international organizations, and their branches or representative offices in Mongolia.

Article 4.Outgoing currency reserves of Mongolia

1.The outgoing currency reserves of Mongolia in the ownership of commercial banks and competent state authorities shall consist of:

1/gold currency held in foreign banks and financial institutions;

2/foreign currencies which are freely convertible;

3/all kind of securities which are payable and saleable in foreign securities markets; and

4/any other assets which are used internationally as currency reserves, excluding those set forth in 1 and 2 in this paragraph.

2.The state property items set forth in 1 of this paragraph shall refer to the outgoing currency reserves in the possession of competent state authorities.

3.Outgoing net currency reserves owned by the Mongolian state and possessed by competent state authorities shall be calculated deducting short-term loans and deposits granted by foreign countries from the total sum of every outgoing currency reserves.

Article 5.The currency market and the exchange rate in Mongolia

1.The currency market of Mongolia is currency exchange activities of authorized banks, exchanges and brokerage companies on the basis of supply and demand.

2.The Bank of Mongolia shall fix and publicly announce the exchange rate of the tugrug in relation to currencies which are bought and sold on the currency market by commercial banks on a comparative basis with a stable foreign currency used in foreign commerce by a majority of that country.

3.An increase or decrease in the tugrug exchange rate by five or more percent from the previous day shall be consented with the Prime Minister of Mongolia. Not reaching consensus shall not interrupt to the president of the Bank of Mongolia to make a decision.

4.A commercial bank shall set its own exchange rate for buying and selling currencies on the basis of market demand.

5.The official exchange rate announced by the Bank of Mongolia shall be followed in determining the amount of customs and other taxable income by converting the income earned in economic and non-national currencies and the border price of imported goods into tugrug and reflecting any assets and sources denominated in foreign currencies in tugrugs for the purpose of accounting.

/This paragraph was revised according to the law of 9 July 2009/

6.A non-banking financial institution licensed to conduct foreign exchange trading shall set its own exchange rate for buying and selling cash based on foreign exchange market demand.

/The word "special" was removed from this section by the law of June 17, 2022, and it will be entry into force from January 1, 2023/

/This paragraph was added according to the law of 9 July 2009/

CHAPTER TWO

POWERS OF STATE AUTHORITIES WITH RESPECT TO CURRENCY REGULATION

Article 6.The powers of the State Great Khural

The State Great Khural shall exercise the following powers in relation to currency settlements:

1/to determine the State policy in relation to currency;

2/to control and make decisions in respect of government loans to be borrowed from foreign countries and its balance draft of outgoing payments of Mongolia;

3/to establish a minimum level of outgoing net currency reserves, which is appropriate to be kept in state ownership;

4/to make decisions on bringing purified gold from the state reserves into currency transaction; and

5/any other powers set forth in legislation.

Article 7.The powers of the Government

The Government shall exercise the following powers in relation to currency settlements:

1/to take measures for increasing resources and for improving the balance of foreign currency;

2/to plan the balance of outgoing currency reserves of Mongolia and control its implementation;

3/to make proposals with respect to government loans from foreign countries and their payment and implement it;

4/other powers set forth in the legislation.

Article 8.The powers of the Bank of Mongolia

The Bank of Mongolia shall exercise the following powers in relation to currency settlements:

1/to regulate and conduct nationwide currency transactions;

2/to take measures for increasing the outgoing currency reserves of the state;

3/to conduct currency transactions and external currency settlements in the Mongolian and foreign currency markets within its power;

4/to make proposals on the minimum levels of outgoing net currency reserves, which is appropriate to be kept in the state ownership, get it approved, keep, and accommodate it properly and effectively;

5/to conduct Government currency transactions and foreign settlements;

6/to control permanent residents' outgoing settlements and cash transactions in foreign currencies;

/This paragraph was revised according to the law of 30 November 2001/

7/to determine a procedure for rendering accounts and reports on currency transactions;

8/to submit unified accounts and reports on currency transaction to the State Great Khural on a quarterly basis; and

9/other powers set forth in the legislation.

CHAPTER THREE

CURRENCY TRANSACTIONS

Article 9.Currency transactions

1.The currency transactions shall mean activities as selling, buying, saving, lending, transferring, and disposing currencies, giving currencies as a security, and their entry to and exit from the state border.

2.Banks shall deal with foreign currency transactions at the same time and in the same manner with the national currency transactions.

3.The Governor of the Bank of Mongolia and the Minister of Finance together shall approve the rules of transactions of the national currency of Mongolia and non­convertible foreign currencies, and their entry to and exit from the border of Mongolia.

Article 10.The currency transactions conducted by the Bank of Mongolia

1.The Bank of Mongolia is permitted to buy currencies and purified gold from domestic and foreign banks, other business entities and organizations or citizens for the purposes of increasing and regulating the outgoing currency reserves of Mongolia.

2.In order to maintain the stability of the togrog rate the Bank of Mongolia shall sell foreign currency from the outgoing currency reserves in its possession.

Article 11.The rights, duties and currency transactions of commercial banks to be conducted

1.A commercial bank with the permission of the Bank of Mongolia, shall conduct the following currency transactions:

1/conducting non-cash foreign currency settlements;

2/buying and selling of foreign currencies in cash;

3/opening of foreign currency accounts for permanent and temporary residents and making transactions; and

4/all kinds of operations involving foreign currency such as providing credit in foreign currencies and giving guarantees.

2.Commercial banks involved in currency transaction shall have the following duties:

1/to report and prepare accounts on currency transaction in accordance with established regulations;

2/to conduct operations which can affect the rate of the togrog only with the permission of the Bank of Mongolia;

3/to secure and keep the foreign currency bank accounts of customers secret; and

4/to conduct transactions involving the foreign currency of customers on the demand of the customer and to pay interest on foreign currencies held in accounts.

3.Commercial banks shall establish the commission to be imposed on its foreign exchange services.

Article 12.The currency transactions of business entities, organizations and citizens

1.Permanent and temporary residents, specified in the Subparagraphs 2 and 3 of the paragraph 7 of the Article 3, and Paragraph 8 of this Article, shall buy, sell, lend and transfer foreign currency only through the Bank of Mongolia and its authorized commercial banks.

2.If permanent residents specified in the Subparagraphs 2 and 3 of the paragraph 7 of the Article 3, who received foreign currency income in the form of cash or non-cash shall sell or hold it in a commercial bank authorized by the Bank of Mongolia within 60 days of receipt of that income.

3.Permanent residents specified in the Subparagraph 2 of the paragraph 7 of the Article 3, who conduct work and services in foreign currency in the form of cash shall sell or hold it in commercial banks for the proper period of time in accordance with the procedure approved by the Bank of Mongolia except for such amounts needed for making daily transactions.

/This paragraph was amended according to the law of 30 November 2001/

4.Permanent residents specified in the Subparagraphs 2 and 3 of the paragraphs 7 of the Article 3 shall be registered with the Ministry of Finance in order to provide credit to, assistance to, or to set up, capital in a foreign country.

5.Permanent and temporary residents shall provide written contracts for buying, borrowing, selling and lending foreign currency from commercial banks, and loan guarantees.

Article 13.The entry of currency to Mongolia and its exit

1.Citizens of Mongolia, foreign citizens and stateless persons are permitted to bring in foreign currency as declared amounts at the customs office through the State borders of Mongolia.

2.Permanent and temporary residents of Mongolia and stateless persons are permitted to take foreign currency out through the State borders of Mongolia in the following circumstances:

1/by providing a document verifying that freely convertible foreign currencies have been purchased from commercial banks authorized to carry out external settlements;

2/by providing a declaration from the customs office proving that such foreign currency entered Mongolia from abroad;

3/by providing a certificate from the State notary office certifying that such foreign currency was received as a gift or under inheritance; and

4/as provided by the legislation of Mongolia.

3.A citizen of Mongolia may carry freely convertible foreign currency out of Mongolia in such quantities as declared to the customs office unless otherwise prohibited by law.

Article 14.Foreign currency accounts, credit and settlement

1.Unified registration of Government loans received from foreign and international banks and financial institutions shall be recorded according to the legislation.

/This paragraph was amended according to the law of 18 February 2015/

2.The Minister of Finance shall issue the foreign loan guarantee through the Government line with the approval of the Government. The Government shall not be responsible for the loan taken without the guarantee payment of the Minister of Finance.

/This subparagraph was invalidated according to the law of 18 February 2015/

3.The Government shall sell or lend loans and aid funds received from foreign countries and international banks and financial institutions to the Bank of Mongolia, and commercial banks, other business entities, and organizations were authorized foreign payment and settlement rights by it by agreement.

/This subparagraph was invalidated according to the law of 18 February 2015/

4.Interest, payment period, purpose, responsibility shall be included in the loan agreement specified in the 3rd paragraph of this Article by mutually agreed of the parties.

/This subparagraph was invalidated according to the law of 18 February 2015/

5.Banks, other business entities and organizations that use the government's loans from abroad shall provide funds to repay the loans from time to time and pay them to the budget.

/This subparagraph was invalidated according to the law of 18 February 2015/

6.Business entities, organizations and citizens of Mongolia shall register all loans in foreign currencies borrowed from abroad with the Bank of Mongolia.

/This subparagraph was invalidated according to the law of 30 November 2001/

7.External settlements from the State budget shall only be repaid with the permission of the relevant financial institution.

8.The Ministry of Finance shall execute the Government's foreign currency transactions and external settlements only through the banks.

9.Permanent and temporary residents may hold foreign currency accounts in commercial banks authorized by the Bank of Mongolia to carry out external settlements or in the branches of foreign banks operating in that country.

CHAPTER FOUR

CONTROL OF CURRENCY TRANSACTIONS

Article 15.Institutions which control currency transactions

1.The Government, the Bank of Mongolia and the Financial Regulatory Commission shall control the transactions of currencies of business entities and organizations in Mongolia in accordance with their respective powers.

/Amendment was added to this Article according to the law of 09 July 2009/

Article 16.State Inspectors for the control of currency

1.The State General Inspector, the Senior State Inspectors and State Inspectors shall control currency.

2.The State General Inspector of currency control shall be the Governor of the Bank of Mongolia, and the Senior state inspector shall be the Deputy Governor of the Bank of Mongolia in charge of currency matters and the Chairman of the Financial Regulatory Commission.

/Amendment was added to this Article according to the law of 09 July 2009/

3.State Inspectors in charge of currency control shall be appointed by the State General Inspector, and the State inspectors of the Financial Regulatory Commission shall be appointed by the chairman of the Financial Regulatory Commission respectively.

/Amendment was added to this Article according to the law of 09 July 2009/

Article 17.The duties of the institutions in charge of currency control and the powers of the State Inspectors

1.The Bank of Mongolia shall perform the following principal duties:

1/to inspect compliance of the legislation on currency settlements in business entities, organizations and citizens regardless of type and form of their properties and subordination;

2/to inspect documents related to the currency transactions;

3/to inspect accuracy of reports, statements and registration with respect to currency transactions and external settlements; and

4/to inspect compliance of the legal acts in currency transaction, approved by the authorized institutions in conformity with the legislation.

2.The Government shall control the use and expenditure of currency in its possession in accordance with the provisions of international treaties and the laws of Mongolia and shall exercise the control through the Ministry of Finance.

3.State Inspectors shall have the following powers in order to perform its duties of currency control:

1/to examine any documents relating to currency transactions and external settlements, and to require data, references, explanations and required other documents from the relevant officials and citizens;

2/to control currency transactions and settlements and produce an act on the basis of inspection findings and ensure its enforcement. Act of State Inspectors shall be effective upon approved by the State General Inspector or the Senior State Inspector. Act shall be signed by the relevant officials and citizens. If they do not accept the act, their explanation shall be issued;

3/to oblige to rectify the defects found in the act within a specified time and to make a demand;

4/to charge with responsibility on persons who fail to fulfill demands or who are in breach of the legislation pursuant to the Law on Petty Offence;

/This paragraph was amended according to the law of 04 December 2009/

5/to submit a proposal to the State General Inspector in charge of currency control in regards with cancellation of the license to conduct activities on currency transactions and the settlements in breach of this law;

6/to provide the investigation and inquiry authorities with any relevant documents if breaches of the legislation on currency settlements have a nature of crime.

4.State Inspectors of currency control shall be obliged to keep secret on currency assets and trades of citizens, banks and other business entities and organizations obtained in the course of exercising control of currency operations.

5.If an official of the currency control authority does not fulfil their duties, he/or she shall be charged with responsibility in accordance with the legislation.

6.If business entities, organizations and citizens conclude arbitration clause, disputes in respect of the currency transaction shall be resolved by the arbitration, in other cases shall be resolved by the courts.

/Amendment was added to this paragraph according to the law of 26 January 2017/

Article 18.Responsibilities on breaches of the laws

1.If an action of the state official, breached this law, does not have a nature of crime, responsibility shall be imposed in accordance with the Law on Public Service:

2.Citizens or business entities, who breached this law, shall be charged with responsibility in accordance with the Law on Petty Offence.

/This Article was revised according to the law of 04 December 2015/

Article 19.Entry into force of law

This law shall be entry into force from June 1, 1994.

CHAIRMAN OF THE STATE GREAT KHURAL OF MONGOLIA BAGABANDI.N