The Central Bank of Kazakhstan assessed the scale of drug trafficking using non-resident cards

The Central Bank of Kazakhstan explained the proposal to tighten the opening of bank accounts for foreigners by the fight against the sale of drugs. Kazakh banks are popular among Russians for opening Visa and Mastercard cards, and restrictions may affect this

The National Bank of Kazakhstan identified about 1.5 thousand bank cards with a turnover of several billion tenge (1 ruble costs about 5 tenge), which were opened by foreigners and used for the illegal sale of narcotic drugs. Because of this, the National Bank has developed proposals to tighten the conditions for opening cards by non-residents, a representative of the Kazakh regulator told RBC.

“Against the backdrop of the growth of Internet fraud and illegal transactions using electronic instruments, cases of using schemes for issuing payment cards (so-called drop cards) with the participation of foreign citizens without visiting the bank or on the basis of a one-time visit to Kazakhstan have become more frequent . In the future, the card data can be used in illegal trafficking for the sale of narcotic drugs. Over 1.5 thousand such payment cards have been installed with a turnover of several billion tenge,” said a representative of the National Bank.

To combat the illegal distribution of narcotic drugs, the Financial Monitoring Agency, the National Bank of Kazakhstan, and the Agency for Regulation and Development of the Financial Market have developed their proposals, the regulator’s representative added. On October 26, the National Bank of Kazakhstan published a draft resolution that will oblige banks to open cards to foreigners only in their personal presence and on the basis of documents confirming the validity of their stay on the territory of Kazakhstan. Such documents can be an employment contract, a training contract, a residence permit, etc. The initiative is open for public discussion until November 9.

“Based on the results of the positions received, a mechanism will be developed aimed at preventing and minimizing the risks of using payment instruments and services of financial organizations for criminal purposes,” the regulator’s representative emphasized. He added that the proposed amendments are not aimed at creating obstacles and barriers for respectable bank clients.

The draft resolution states that the payment card will be issued to a foreigner temporarily staying or permanently residing in Kazakhstan “subject to their presentation, respectively, of a temporary residence permit in the Republic of Kazakhstan or a permanent residence permit.” According to the Law “On the Legal Status of Foreigners,” there are two statuses in Kazakhstan: “permanently resident” and “temporarily staying” foreigners. “Permanent residents” include foreigners who have received permission for temporary and permanent residence in the country, and “temporarily staying” foreigners are those who are in Kazakhstan on “another legal basis.” A representative of the National Bank of Kazakhstan did not answer RBC’s question whether the new resolution will apply to foreigners who legally entered the country but have not received a temporary or permanent residence permit.

In March 2022, international payment systems (IPS) Visa and Mastercard left Russia, which is why their cards issued by Russian banks stopped working abroad. In order to be able to use non-cash payments abroad, Russians began to massively open MPS cards in foreign banks. The simplest opening conditions were offered by banks in nearby countries, including Kazakhstan.

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Russians could open cards either by personally contacting a bank branch or remotely through special services by proxy. A number of banks are already closing this scheme. For example, the Belarusian People's Bank (BNB-Bank) from September 26 stopped servicing non-residents who became clients of the bank by proxy.

The Central Bank of Kazakhstan, in its review of the financial stability of the republic, noted that in June and July 2022, 50.7% of the total number of new cards for the entire 2022 were issued. This, in his opinion, “may be due to the phenomenon of “card tourism” caused by demand from Russian citizens.” At the end of 2022, the number of cards of international payment systems in Kazakhstan increased by 8.35%, to 42.9 million cards. However, this is the minimum growth rate in five years. In other countries neighboring Russia, annual growth rates were higher than in 2021.