It covers payment methods and information on, banking systems, foreign exchange controls, and U.S. and correspondent banking.
Methods of Payment
As in other markets, payment methods and terms vary depending upon the company’s business model and relationship with its trading partners. For companies that are new to this market, requesting advance payment for goods and services from a Kazakhstani customer may be prudent until both parties establish a positive record of payment. Exporters should also keep in mind that Kazakhstani firms may have difficulties in securing financing from local banks due to high interest rates and stringent lending requirements.
The safest method to receive payment for a U.S. exporter is through an irrevocable letter of credit (L/C) confirmed by a major Western bank. In general, importers must deposit enough funds to cover payment, provide collateral or obtain a credit line from the issuing bank before applying for a letter of credit. U.S. companies are strongly advised to reconfirm payment arrangements with the importer prior to shipping goods. Several U.S. banks accept letters of credit from some of the largest Kazakhstani banks, especially those approved by the U.S. Export-Import Bank. Once a U.S. firm has established a strong relationship with a local trading partner, it may wish to consider extending short- and eventually longer-term credit to bolster sales volume. This should be done with caution and only after careful evaluation and the establishment of successful payments.
Kazakhstan made the use of International Bank Account Numbers (IBANs) and Bank Identification Codes (BICs) mandatory in June 2010. If a U.S. company pays a beneficiary in Kazakhstan or initiates payment from an account in Kazakhstan, it must provide the beneficiary’s IBAN and beneficiary bank’s SWIFT BIC in the payment instructions. Failure to provide an IBAN may result in payment rejection, delay, or additional charges.
For more information about methods of payment or other trade finance options, please reference this Trade Finance Guide made available by the U.S. Department of Commerce.
Kazakhstan has a central bank system, led by the National Bank of Kazakhstan (NBK) and the Agency for Regulation and Development of the Financial Market (AFR). The NBK performs core central bank functions, manages the country’s sovereign wealth fund and pension system assets, while the AFR is the main financial regulator overseeing banks, insurance companies, stock markets, microcredit organizations, debt collection agencies, and credit bureaus. The AFR is committed to move gradually to the Basel III regulatory standard. As of July 2021, Basel III methodology applies to capital and liquidity calculation with required regulatory ratios gradually changing to match the standard.
As of July 2021, Kazakhstan has 23 commercial banks. The sector is highly concentrated, with the five largest banks accounting for over 60 percent of total banking sector assets. The sector remains impaired by legacy non-performing loans, poor risk management, weak corporate governance practices at some banks and significant related-party exposures. The authorities have undertaken several measures to strengthen the sector, including capital injections, enhanced oversight and expanded regulatory authorities. Three Russian bank subsidiaries are or were under U.S. sanctions – VTB, Alfa Bank (a local bank purchased the subsidiary), and Sberbank (a sale to local entities was under discussion in August 2022).
Currently, foreign banks are allowed to operate in the country through their local subsidiaries, local branches, joint ventures and representative offices. As of July 2021, AFR reports 14 banks with foreign ownership in the country, of which 11 are subsidiaries of foreign banks, and 19 representative offices of foreign banks with very limited operational base. Starting December 16, 2020, as a part of Kazakhstan’s WTO commitments, foreign banks are also allowed to operate via branches in compliance with regulatory norms prescribed by the NBK and AFR. Legislation mandates equal treatment for foreign and Kazakhstani investors, a position reinforced in 2005 by legislative amendments that lifted restrictions on the participation of foreign capital in the banking sector. No individual or legal entity may own more than 10% of a bank’s shares without permission from the authorized body (unless they own it indirectly via another entity which owns ten percent or more in bank’s shares).
Foreigners may open bank accounts in local banks if they have a local tax registration number.
Foreign Exchange Controls
Kazakhstan is bound by Article 8 of the International Monetary Fund’s Articles of Agreement, adopted in 1996, which prohibits government restrictions on currency conversions or the repatriation of investment profits.
Local currency legislation permits non-residents to freely receive and transfer dividends, interest and other income on deposits, securities, loans, and other currency transactions with residents. However, it also requires that a currency contract must be presented to the servicing bank if the transfer exceeds USD 10,000. Money transfers over USD 50,000 require the servicing bank to notify the transaction to the authorities, so the transferring bank may require the transferring parties, whether resident or non-resident, to provide information for that notification. Residents seeking to transfer property or money to a non-resident in excess of USD 500,000 are required to register the contract with the NBK.
Residents (including foreign-owned companies that are residents for tax purposes) face more stringent restrictions. Exchanges of currency in amounts greater than USD 50,000 in any given day are generally prohibited, though there are important exceptions for payments for goods or services to non-residents that are invoiced in a foreign currency, as well as payments of dividends. There are no time limitations on remittances; and timelines to remit investment returns depend on internal procedures of the servicing bank.
While there are no restrictions on settling accounts in foreign currencies between non-residents and residents, transactions between residents must be settled in tenge. A new law on currency regulation, which came into force in July 2019, treats local branches of foreign companies as residents, except for non-financial organizations treated as non-residents based on special agreements with Kazakhstan or those whose activity does not constitute permanent establishment of a non-resident as defined by the Tax Code. Prior to this law, foreign company branches were treated as non-residents. Foreign investors claim the new law creates onerous reporting requirements and increases the cost of doing business. Companies registered with the Astana International Financial Center are not subject to currency and settlement restrictions.
U.S. Banks & Local Correspondent Banks
Citibank is the only U.S. bank subsidiary in Kazakhstan, and it services corporate clients. CitiBank Kazakhstan 41A, Kazybek Bi St, 2nd floor 050010 Almaty, Kazakhstan Tel: 7 (727) 298-0400. JP Morgan Chase Bank has a representative office in Almaty, Kazakhstan.
U.S. banks with correspondent relations with local banks include, but are not limited to, Bank of New York, Citibank, and JP Morgan Chase Bank.
For more information about the methods of payment or other trade finance options, please read the Trade Finance Guide.
To access Kazakhstan’s ICS section on financing, visit the U.S. Department of State Investment Climate Statement website.