Money Laundering &Terrorist Financing Risk Management
Guidelines Anti Money Laundering Department Mercantile Bank Limited June, 2016
Focus Group Coordinator: Mr. Monindra Kumar Nath Additional Managing Director
& CAMLCO Mercantile Bank Limited Head Office, Dhaka. Members : Md. Nasim
Alam First Vice President & Deputy CAMLCO Mercantile Bank Limited Anti
Money Laundering Department Head Office, Dhaka. Muhammad Khairul Hasan First
Assistant Vice President Mercantile Bank Limited Anti Money Laundering
Department Head Office, Dhaka. Mainul Hasan First Assistant Vice President
Mercantile Bank Limited Anti Money Laundering Department Head Office, Dhaka.
PREFACE Banking is the inevitable part of an economy and plays a major contribution
towards socioeconomic development of a country. The sector is considered as
life blood of the economy as well. As one of the most important sectors of the
financial system, it forms the core of the money market and plays very dynamic
role in mobilizing resources for productive investments in a country, which in
turn contributes to economic development. An efficient and stable banking
system is the prerequisite for overall development of the country. To maintain
stability and integrity of international financial system, Financial Action
Task force (FATF), an intergovernmental body established by G-7 in 1989, has
set 40 recommendations for preventing money laundering and terrorist financing.
In domestic level, Bangladesh Bank, as the major regulator of the financial
system of the country plays a pivotal role to stabilize and enhance the
efficiency of the financial system. Considering money laundering (ML) and
terrorist financing (TF) as one of the major threats to the stability and the
integrity of the financial system, BB has taken several initiatives including
issuance of circulars/circular letters/Guidance Notes under Money Laundering
prevention Act and Anti-terrorism Act. The regulator issued a comprehensive
„Guidance Notes on Prevention of Money Laundering‟ in 2003 based on Money
Laundering Prevention Act, 2002 which enumerated the duties and
responsibilities of commercial banks of the country to prevent money
laundering. To keep pace with international initiatives and promulgated Money
Laundering Prevention Act- 2012 (with amendment in 2015) and Anti-Terrorism
Act-2009 (with amendment in 2012 & 2013), BFIU of Bangladesh Bank has send
us “Money Laundering & Terrorist Financing Risk Assessment Guidelines” vide
their BFIU Circular Letter No. 01/2015 dated 08.01.2015 with an instruction to
implement the guidelines in all sectors of Bank. According to Bangladesh Bank‟s
guidelines we have prepared this guideline. This Guidelines has been formulated
in accordance with the provisions of the Money Laundering Prevention Act-2012
(with amendment in 2015), Anti-Terrorism Act-2009 (with amendment in 2012 &
2013) and the Money Laundering & Terrorist Financing Risk Assessment
Guidelines and Money Laundering & Terrorist Financing Risk Management
Guideline issued by BFIU and is intended to ensure that all directors and
employees of Mercantile Bank Limited understand and comply with the
requirements and obligations imposed on them. The purpose of this guidance is
to outline the legal and regulatory framework for Anti-Money Laundering and
Combating Financing of Terrorism (AML/CFT) requirements and systems across the
financial services sector. With a view to this, the document interprets the
requirements of the relevant laws and regulations, and how they may be
implemented in practice. It indicates good industry practices in AML and CFT
procedures through a proportionate, risk-based approach; and assists the banks
to design and implement the systems and controls necessary to mitigate the
risks of the banks being used in connection with money laundering and the
financing of terrorism. All Directors, Senior Management and Employees of
Mercantile Bank Limited have to comply with the instruction of this guideline.
It will be applied to all products or services offered by Mercantile Bank
Limited. This Guideline is applicable to all domestic/foreign Branches
/offices/subsidiaries of the Bank and is to be read in conjunction with related
operational guidelines issued from time to time. CONTENTS Sl. No. Chapter Page
No. 1 An overview of money laundering and terrorist financing 1-7 1.1
Introduction 1 1.2 Defining money laundering 1 1.3 Stages of money laundering 3
1.4 Why money laundering is done 4 1.5 Defining terrorist financing 4 1.6 The
link between money laundering and terrorist financing 5 1.7 Why we must combat
ML&TF 6 1.8 Targeted Financial Sanctions 7 2 International initiatives on
ML/TF 8-14 2.1 Introduction 8 2.2 The United Nations 8 2.3 The Financial Action
Task Force 10 2.4 Asia Pacific Group on Money Laundering (APG) 12 2.5 The
Egmont group of financial intelligence units 13 2.6 The Basel committee on
banking supervision 13 3 National initiatives on ML/TF 15-23 3.1 Introduction
15 3.2 Founding member of APG 15 3.3 Legal framework 15 3.4 Central and
regional Taskforces 16 3.5 Anti-money laundering department 16 3.6 Bangladesh
Financial Intelligence Unit 16 3.7 National coordination committee and working
committee 16 3.8 National ML &TF risk assessment (NRA) 17 3.9 National
strategy for preventing ML and TF 17 3.10 Chief anti-money laundering
compliance officers (CAMLCO) conference 18 3.11 Egmont group memberships 18
3.12 Anti militants and de-radicalization committee 18 3.13 Memorandum of
understanding (MOU) between ACC and BFIU 18 3.14 Implementation of TFS 19 3.15
Coordinated effort on the implementation of the UNSCR 19 3.16 Risk based
approach 19 3.17 Memorandum of understanding (MOU) BFIU and other FIU’s 23 4
AML &CFT compliance Program 24-33 4.1 Introduction 24 4.2 Component of AML
& CFT compliance program 24 4.3 Development of bank’s AML &CFT
compliance program 24 4.4 Communication of compliance program 24 4.5 Senior
management role 25 4.6 Policies and procedures 28 4.7 Customer acceptance
policy 28 5 Compliance Structure of the Bank 34-41 5.1 Introduction 34 5.2
Organization Structure 34 5.3 Central compliance unit 35 5.4 Formation of AMLD
36 5.5 Chief anti money laundering compliance officer (CAMLCO) 37 5.6 Branch
anti money laundering compliance officer (BAMLCO) 7.2 Legal obligations 59 7.3
Obligations under circular 59 7.4 Records to be kept 60 7.5 Customer
information 60 7.6 Transactions 60 7.7 Internal and external reports 61 7.8
Other measures 61 7.9 Formats and retrieval of records 61 8.2 Suspicious
transaction reporting 63 8.3 Identification of STR/SAR 64 8.4 Tipping off 65
8.5 Cash transaction report 65 8.6 Self assessment report 66 8.7 Independent
testing procedure 66 8.8 Internal audit department’s or ICC’s obligations
regarding self assessment or 66 Independent testing procedure 8.9 Central
compliance unit’s obligations regarding self assessment or independent 67
Testing procedure 39 5.7 Internal control and compliance 40 5.8 External
auditor 41 6 Customer due diligence 42-58 6.1 Introduction 42 6.2 Legal
obligations of CDD 43 6.3 General rule of CDD 44 6.4 Timing of CDD 46 6.5
Transaction monitoring 46 6.6 Exception when opening a bank account 46 6.7 In
case where conducting the CDD measure is not possible 46 6.8 Customer
identification 47 6.9 Verification of source of funds 50 6.10 Verification of
address 50 6.11 Persons without standard identification documentation 50 6.12
Walk-in/one off/Online customers 51 6.13 Non face to face customers 51 6.14
Customer unique identification code 51 6.15 Corresponding banking 52 6.16
Politically exposed persons(peps),influential persons and chief executives or
52 top level officials of any international organization 6.17 Wire transfer 56
6.18 CDD for beneficial owners 57 6.19 Reliance on third party 58 6.20
Management of legacy accounts 58 7 Record keeping 59-62 7.1 Introduction 59
7.10 Required files for ML/TF compliance in Branch level 61 8 Reporting to BFIU
63-67 8.1 Legal obligations 63 9 Recruitment, awareness and training 68-69 9.2
Employee screening 68 9.3 Know your employee(KYE) 68 9.4 Training for employee
68 9.5 Awareness of senior management 69 9.6 Customer awareness 69 9.7
Awareness of mass people 69 10 Terrorist financing &proliferation financing
70-85 10.1 Introduction 70 10.2 Legal obligations 70 10.3 Obligations under
circular 70 10.4 Necessity of funds by terrorist 70 10.5 Sources of
fund/raising of fund 71 10.6 Movement of terrorist fund 71 10.7 Targeted
Financial Sanctions 72 10.8 Automated screening mechanism of UNSCR’s 73 10.9
Role of banks in preventing TF &PF 84 10.10 Flow-chart for implementation
of TFS by banks 85 9.1 Obligations under circular 68 A n n e x u r e Annexure-A
Risk Register 86-126 Annexure-B KYC Documentation 127-135 Annexure-C Annexure-D
Red Flags pointing to Money Laundering Walk in/One Off/Online Customers 136-137
138 List of Abbreviations AML & CFT Anti-Money Laundering & Combating
the Financing of Terrorism AMLD Anti Money Laundering Department APG Asia
Pacific Group on Money Laundering ARS Alternative Remittance System ATA Anti
Terrorism Act BAMLCO Branch Anti Money Laundering Compliance Officer BFIU
Bangladesh Financial Intelligence Unit BB Bangladesh Bank CAP Customer
Acceptance Policy CCU Central Compliance Unit CAMLCO Chief Anti Money
Laundering Compliance Officer CDD Customer Due Diligence DNFBPs Designated
non-financial businesses and professions EDD Enhanced Due Diligence FATF
Financial Actions Task Force HR Human Resources ICCD Internal Control &
Compliance Division IPs Influential Persons KYC Know Your Customer KYE Know
Your Employee MBL Mercantile Bank Limited ML Money Laundering MLPA Money
Laundering Prevention Act MLPR Money Laundering Prevention Rules MOU Memorandum
of understanding NRA National ML & TF Risk Assessment PEPs Politically
Exposed Persons PF Proliferation Financing RO-FI Reporting
Organizations-Financial Institutions STR Suspicious Transaction Report SAR
Suspicious Activity Report TF Terrorist Financing TFS Targeted Financial
Sanctions UNSCR UN Security Council Resolution Page 1 of 138 AN OVERVIEW OF
MONEY LAUNDERING AND TERRORIST FINANCING 1.1 INTRODUCTION Money Laundering is
happened by launderers worldwide to conceal the proceeds earned from criminal
activities. It happens in almost every country in the world, and a single
scheme typically involves transferring money through several countries in order
to obscure its origins. And the rise of global financial markets makes money
laundering easier than ever, making it possible to anonymously deposit proceeds
of crime in one country and then have it transferred to any other country for
use. Money laundering has a major impact on a country‘s economy as a whole,
impeding the social, economic, political, and cultural development of a
society. Both money laundering and terrorist financing can weaken individual
financial institution, and they are also threats to a country‘s overall
financial sector reputation. Combating money laundering and terrorist financing
is, therefore, a key element in promoting a strong, sound and stable financial
sector. The process of money laundering and terrorist financing (ML/TF) is very
dynamic and ever evolving. The money launderers and terrorist financers are
inventing more and more complicated and sophisticated procedures and using new
technology for money laundering and terrorist financing. To address these
emerging challenges, the global community has taken various initiatives against
ML & TF. In accordance with international initiatives, Bangladesh has also
acted on many fronts. 1.2 DEFINING MONEY LAUNDERING Money laundering can be
defined in a number of ways. But the fundamental concept of money laundering is
the process by which proceeds from a criminal activity is disguised to conceal
their illicit origins. Most countries adopted to the following definition which
was delineated in the United Nations Convention against Illicit Traffic in
Narcotic Drugs and Psychotropic Substances (1988) (the Vienna Convention) and
the United Nations Convention Against Transnational Organized Crime (2000) (the
Palermo Convention): The conversion or
transfer of property, knowing that such property is derivedØ from any offense, e.g.
drug trafficking, or offenses or from an act of participation in such offense
or offenses, for the purpose of concealing or disguising the illicit origin of
the property or of assisting any person who is involved in the commission of such
an offense or offenses to evade the legal consequences of his actions; The concealing or disguising the true nature,
source, location, disposition,Ø
movement, rights with respect to, or ownership of property, knowing that such
property is derived from an offense or offenses or from an act of participation
in such an offense or offenses, and; The
acquisition, possession or use of property, knowing at the time ofØ receipt that such
property was derived from an offense or offenses or from an act of participation
in such offense or offenses. Page 2 of 138 Section 2 (v) of Money Laundering
Prevention Act (MLPA), 2012 of Bangladesh defines money laundering as follows:
‗Money laundering‘ means – i. knowingly moving, converting, or transferring
proceeds of crime or property involved in an offence for the following
purposes:- (1) Concealing or disguising the illicit nature, source, location,
ownership or control of the proceeds of crime; or (2) Assisting any person
involved in the commission of the predicate offence to evade the legal
consequences of such offence; ii. Smuggling money or property earned through
legal or illegal means to a foreign country; iii. knowingly transferring or
remitting the proceeds of crime to a foreign country or remitting or bringing them
into Bangladesh from a foreign country with the intention of hiding or
disguising its illegal source; or iv. Concluding or attempting to conclude
financial transactions in such a manner so as to reporting requirement under
this Act may be avoided; v. converting or moving or transferring property with
the intention to instigate or assist for committing a predicate offence; vi.
Acquiring, possessing or using any property, knowing that such property is the
proceeds of a predicate offence; vii. Performing such activities so as to the
illegal source of the proceeds of crime may be concealed or disguised; viii.
Participating in, associating with, conspiring, attempting, abetting,
instigating or counseling to commit any offences mentioned above. Money
laundering is a criminal offence under section 4(1) of MLPA, 2012 and penalties
for money laundering are- 1. Any person who commits or abets or conspires to
commit the offence of money laundering, shall be punished with imprisonment for
a term of at least 4(four) years but not exceeding 12(twelve) years and, in
addition to that, a fine equivalent to the twice of the value of the property
involved in the offence or taka 10 (ten) lacks, whichever is greater. 2. In
addition to any fine or punishment, the court may pass an order to forfeit the
property of the convicted person in favor of the State which directly or
indirectly involved in or related with money laundering or any predicate
offence. 3. Any entity which commits an offence under this section shall be
punished with a fine of not less than twice of the value of the property or
taka 20(twenty) lacks, whichever Page 3 of 138 is greater and in addition to
this the registration of the said entity shall be liable to be cancelled. 1.3
STAGES OF MONEY LAUNDERING Obviously there is no single way of laundering money
or other property. It can range from the simple method of using it in the form
in which it is acquired to highly complex schemes involving a web of
international businesses and investments. Traditionally it has been accepted
that the money laundering process comprises three stages: Placement – Placement
is the first stage of the money laundering process, in which illegal funds or
assets are brought first into the financial system directly or indirectly.
Layering - Layering is the second stage of the money laundering process, in
which illegal funds or assets are moved, dispersed and disguised to conceal
their origin. Funds can be hidden in the financial system through a web of
complicated transactions. Integration - Integration is the third stage of the
money laundering process, in which the illegal funds or assets are successfully
cleansed and appeared legitimate in the financial system. The three basic steps
may occur as separate and distinct phases. These steps may comprise numerous
transactions by the launderers that could alert a financial institution to
criminal activity. They may also occur simultaneously or, more commonly, may
overlap. How the basic steps are used depends on the available laundering
mechanisms and the requirements of the criminal organizations. Page 4 of 138
1.4 WHY MONEY LAUNDERING IS DONE First, money represents the lifeblood of the
organization/person that engages in criminal conduct for financial gain because
it covers operating expenses and pays for an extravagant lifestyle. To spend
money in these ways, criminals must make the money they derived illegally
appear legitimate. Second, a trail of money from an offense to criminals can
become incriminating evidence. Criminals must obscure or hide the source of
their wealth or alternatively disguise ownership or control to ensure that
illicit proceeds are not used to prosecute them. Third, the proceeds from crime
often becomes the target of investigation and seizure. To shield ill-gotten
gains from suspicion and protect them from seizure, criminals must conceal
their existence or, alternatively, make them look legitimate. 1.5 DEFINING
TERRORIST FINANCING Terrorist financing can simply be defined as financial
support, in any form, of terrorism or of those who encourage, plan, or engage
in terrorism. The International Convention for the Suppression of the Financing
of Terrorism (1999) under the United Nations defines TF as follows: 1. If any
person commits an offense by any means, directly or indirectly, unlawfully and
willingly, provides or collects funds with the intention that they should be
used or in the knowledge that they are to be used, in full or in part, in order
to carry out: a. An act which constitutes an offence within the scope of and as
defined in one of the treaties listed in the link given below 1 ; or b. Any
other act intended to cause death or serious bodily injury to a civilian, or to
any other person not taking any active part in the hostilities in a situation
of armed conflict, when the purpose of such act, by its nature or context, is
to intimidate a population, or to compel a government or an international
organization to do or to abstain from doing an act. 2. For an act to constitute
an offense set forth in the preceding paragraph 1, it shall not be necessary
that the funds were actually used to carry out an offense referred to in said
paragraph 1, subparagraph (a) or (b). Bangladesh has ratified this convention
and criminalized terrorism or terrorist activities under section 6(1) of Anti
Terrorism Act, 2009 in line with the requirement set out in 9 (nine)
conventions and protocols that were annexed I the convention. Section 7(1) of
Anti Terrorism Act (ATA), 2009, defines terrorist financing as follows: If any
person or entity willfully provides, receives, collects or makes arrangements
for money, service or any other property, whether from legitimate or
illegitimate source, by any means, directly or indirectly, with the intention
that, it would, in full or in part, be used- Page 5 of 138 a) To carry out
terrorist activity; b) By a terrorist person or entity for any purpose, or is
in the knowledge that it may be used by a terrorist person or entity; The said
person or entity shall be deemed to have committed the offence of terrorist
financing. Moreover, according to Anti Terrorism Act (ATA), 2009 conviction for
terrorist financing shall not depend on any requirement that the fund, service
or any other property was actually used to carry out or direct or attempt to
carry out a terrorist act or be linked to a specific terrorist act. The
penalties for the offences for money laundering are- (1) In case of a TF
offence made by a person, he/she shall be punished with rigorous imprisonment
for a term not exceeding 20 (twenty) years but not less than 4 (four) years,
and in addition to that, a fine equivalent to twice the value of the property
involved with the offence or taka 10(ten) lac, whichever is greater, may be
imposed. (2) In case of a TF offence made by an entity, the Government may listed
the entity in the Schedule or proscribe and listed the entity in the Schedule,
by notification in the official Gazette and in addition to that, a fine
equivalent to thrice the value of the property involved with the offence or of
taka 50 (fifty) lac, whichever is greater, may be imposed. Moreover, the head
of that entity, whether he is designated as Chairman, Managing Director, Chief
Executive or by whatever name called, shall be punished with rigorous
imprisonment for a term not exceeding 20 (twenty) years but not less than 4
(four) years and, in addition to that, a fine equivalent to twice the value of
the property involved with the offence or of taka 20 (twenty) lac, whichever is
greater, may be imposed unless he/she is able to prove that the said offence
was committed without his knowledge or he had tried his best to prevent the
commission of the said offence. 1.6 THE LINK BETWEEN MONEY LAUNDERING AND
TERRORIST FINANCING The techniques used to launder money are essentially the
same as those used to conceal the sources of and uses for terrorist financing.
But funds used to support terrorism may originate from legitimate sources,
criminal activities or both. Nonetheless, disguising the source of terrorist
financing, regardless of whether the source is of legitimate or illicit origin,
is important. If the source can be concealed, it remains available for future
terrorist financing activities. Similarly, it is important for terrorists to
conceal the use of the funds so that the financing activity goes undetected. As
noted above, a significant difference between money laundering and terrorist
financing is that the funds involved may originate from legitimate sources as
well as criminal activities. Such legitimate sources may include donations or
gifts of cash or other assets of organizations, such as foundations or
charities that, in turn, are utilized to support terrorist activities or
terrorist organizations. Page 6 of 138 1.7 WHY MERCANTILE BANK MUST COMBAT ML
& TF Money laundering has potentially devastating economic, security, and
social consequences. Money laundering is a vital process to make crime
worthwhile. It provides the fuel for drug dealers, smugglers, terrorists,
illegal arms dealers, corrupted public officials, and others to operate and
expand their criminal enterprises. This drives up the cost of government due to
the need for increased law enforcement and health care expenditures (for
example, for treatment of drug addicts) to combat the serious consequences
resulted from ML & TF. Money laundering diminishes government tax revenue
and therefore indirectly harms honest taxpayers. It also makes government tax
collection activities more difficult. This loss of revenue generally means
higher tax rates than would normally be the case if the untaxed proceeds of
crime were legitimate. We also pay more taxes for public works expenditures
inflated by corruption. And those of us who pay taxes pay more because of those
who evade taxes. So we all experience higher costs of living than we would if
financial crimes including money laundering were prevented. Money laundering
distorts assets and commodity prices and leads to misallocation of resources.
For financial institutions it can lead to an unstable liability base and to
unsound asset structures thereby creating risks of monetary instability and
even systemic crisis. The loss of credibility and investor‘s confidence, that
such crisis can bring, has the potential of destabilizing financial systems,
particularly in smaller economies. One of the most serious microeconomic
effects of money laundering is felt in the private sector. Money launderers
often use front companies, which co-mingle the proceeds of illicit activity
with legitimate funds, to hide the ill-gotten gains. These front companies have
access to substantial illicit funds, allowing them to subsidize front company
products and services at levels well below market rates. This makes it
difficult, if not impossible, for legitimate business to compete against front
companies with subsidized funding, a situation that can result in the crowding
out of private sector business by criminal organizations. Among its other
negative socioeconomic effects, money laundering transfers economic power from
the market, government, and citizens to criminals. Furthermore, the sheer
magnitude of the economic power that accrues to criminals from money laundering
has a corrupting effect on all elements of society. The social and political
costs of laundered money are also serious as laundered money may be used to
corrupt national institutions. Bribing of government officials undermines the
moral fabric in society, and, by weakening collective ethical standards,
corrupts our democratic institutions. When money laundering goes unchecked, it
encourages the underlying criminal activity from which such money is generated.
A nation cannot afford to have its reputation and financial institutions
tarnished by involvement with money laundering, especially in today's global
economy. Money laundering erodes confidence in financial institutions (FIs) and
the underlying criminal activities like Page 7 of 138 fraud, counterfeiting,
narcotics trafficking, and corruption weaken the reputation and standing of any
financial institution. Actions taken by FIs to prevent money laundering are not
only a regulatory requirement, but also an act of self-interest. A financial
institution tainted by money laundering accusations from regulators, law
enforcement agencies, may loss their good market reputation and damage the
reputation of the country. It is very difficult and requires significant
resources to rectify a problem that could be prevented with proper program.
Besides its effect on macro level, ML & TF also affects individual
financial institution. If a money launderer uses a financial institution for
making his/her money legitimate, the business of that financial institution may
hamper. If the money launderer withdraws his/her deposited money from an FI
before maturity, the FI will face liquidity crisis if the amount is big enough.
Moreover, if it is found that an FI was used for ML & TF activities, and it
did not take proper action against that ML & TF as per the laws of the
country, the FI will have to face legal risk. Finally, the reputation of an FI
can also be heavily affected through its involvement with ML & TF
activities. It is generally recognized that effective efforts to combat ML, TF
& PF cannot be carried out without the co-operation of financial
institutions, their supervisory authorities and the law enforcement agencies.
Accordingly, in order to address the concerns and obligations of these three
parties, these Guidance Notes are drawn up. 1.8 TARGETED FINANCIAL SANCTIONS
The term Targeted Financial Sanctions (TFS) means both asset freezing and
prohibition to prevent funds on other assets from being made available,
directly or indirectly, for the benefit of designated persons and entities.
This TFS is a smart solution to combat terrorism, terrorist financing and
proliferation financing of weapons of mass destruction (WMD) by state actors or
non-state actors from the UN Security Council. In contrast with the economic
sanction on a jurisdiction, TFS is imposed on only suspected person or entities
while innocent person or entities remain safe. Page 8 of 138 INTERNATIONAL
INITIATIVES ON ML AND TF 2.1 INTRODUCTION In response to the growing concern
about money laundering and terrorist activities, the initiatives taken by
international community has acted on many fronts. This part of these Guidelines
discusses the various international organizations and their initiatives
relating to anti-money laundering (AML) and combating the financing of
terrorism (CFT). It further describes the documents and instruments that have
been developed for AML & CFT purposes. 2.2 THE UNITED NATIONS The United Nations
(UN) was the first international organization to undertake significant action
to fight against money laundering on worldwide basis. The role of the UN is
important for several reasons which are followingFirst, it is the international
organization with the broadest range of membership. The UN, founded in 1945,
has 191 members from all across the world. Second, the UN actively operates a
program to fight money laundering; the Global Program against Money Laundering,
headquartered in Vienna, Austria, is part of the UN Office of Drugs and Crime
(UNODC). Third, and perhaps most important that the UN has the ability to adopt
international treaties or conventions that obligate the ratifying countries to
reflect those treaties or conventions in their local laws. In certain cases,
the UN Security Council has the authority to bind all member countries through
a Security Council Resolution, regardless of other actions on the part of an
individual country. 2.2.1 THE VIENNA CONVENTION Due to growing concern about
the increased international drug trafficking and the tremendous amount of
related money entering into financial system, the UN adopted the United Nations
Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic
Substances (1988) known as Vienna Convention, named after the city in which it
was signed. The Vienna Convention deals primarily with provisions to fight the
illicit drug trade and related law enforcement issues. At present, nearly 169
countries including Bangladesh are members to the convention. The convention
has come into force from November 11, 1990. 2.2.2THE PALERMO CONVENTION In
order to fight against internationally organized crimes, the UN adopted the
International Convention against Transnational Organized Crime (2000), named
after the city in which it was signed as Palermo Convention. The Palermo
Convention specifically obligates each ratifying country to: Page 9 of 138 Criminalize money laundering and include all
serious crimes as predicate offenses ofØ
money laundering, whether committed in or outside of the country, and permit
the required criminal knowledge or intent to be inferred from objective facts; Establish regulatory regimes to deter and
detect all forms of money laundering,Ø
including customer identification, record-keeping and reporting of suspicious
transactions; Authorize the cooperation
and exchange of information among administrative,Ø
regulatory, law enforcement and other authorities, both domestically and
internationally, and consider the establishment of a financial intelligence
unit to collect, analyze and disseminate information; and Promote international cooperation.Ø This convention has come
into force from 29th September 2003, having been signed by 147 countries and
ratified by 82 countries. 2.2.3 INTERNATIONAL CONVENTION FOR THE SUPPRESSION OF
THE FINANCING OF TERRORISM The financing of terrorism was an international
concern prior to the attacks on the United States on 11 September, 2001. In
response to this concern, the UN adopted the International Convention for the
Suppression of the Financing of Terrorism (1999). The convention came into
force on April 10, 2002 with 132 countries signing the convention and 112
countries ratifying it. The convention requires ratifying states to criminalize
terrorism, terrorist organizations and terrorist acts. Under the convention, it
is unlawful for any person to provide or collect funds with the (1) intent that
the funds be used for, or (2) knowledge that the funds be used to, carry out
any of the acts of terrorism defined in the other specified conventions that
are annexed to this convention. 2.2.4 SECURITY COUNCIL RESOLUTION 1267 AND
SUCCESSORS The UN Security Council has also acted under Chapter VII of the UN
Charter to require member States to freeze the assets of the Taliban, Osama Bin
Laden and Al-Qaeda and entities owned or controlled by them, as designated by
the Sanctions Committee (now called the 1267 Committee). The initial Resolution
1267 of October 15, 1999 dealt with the Taliban and was followed by 1333 of
December 19, 2000 on Osama Bin Laden and Al-Qaeda. Later Resolutions
established monitoring arrangements (1363 of July 30, 2001), merged the earlier
lists (1390 of January 16, 2002), provided some exclusions (1452 of December
20, 2002) and took measures to improve implementation (1455 of January 17,
2003). The 1267 Committee issues the list of individuals and entities whose
assets are to be frozen and has procedures in place to make additions or
deletions to the list on the basis of representations by member States. The
most recent list is available on the website of the 1267 Committee. Page 10 of
138 2.2.5 SECURITY COUNCIL RESOLUTION 1373 Unlike an international convention,
which requires signing, ratification, and recognition in local law by the UN
member country to have the effect of law within that country, a Security
Council Resolution was passed in response to a threat to international peace
and security under Chapter VII of the UN Charter, is binding upon all UN member
countries. On September 28, 2001, the UN Security Council adopted Resolution
1373, which obligates countries to criminalize actions to finance terrorism. It
further obligates countries to: deny all
forms of support for terrorist groups;Ø
suppress the provision of safe haven or
support for terrorist, including freeing fundsØ
or assets of persons, organizations or entities involved in terrorist acts; prohibit active or passive assistance to
terrorists; andØ cooperate with other countries in criminal
investigations and share information aboutØ
planned terrorist acts. 2.2.6 THE COUNTER-TERRORISM COMMITTEE As noted above,
on September 28, 2001, the UN Security Council adopted a resolution (Resolution
1373) in direct response to the events of September 11, 2001. That resolution
obligated all member countries to take specific actions to combat terrorism.
The resolution, which is binding upon all member countries, also established
the Counter Terrorism Committee (CTC) to monitor the performance of the member
countries in building a global capacity against terrorism. Resolution 1373
calls upon all countries to submit a report to the CTC on the steps taken to
implement the resolution‗s measures and report regularly on progress. In this
regard, the CTC has asked each country to perform a self-assessment of its
existing legislation and mechanism to combat terrorism in relation to the
requirements of Resolution 1373. 2.2.7 GLOBAL PROGRAM AGAINST MONEY LAUNDERING
The UN Global Program against Money Laundering (GPML) is within the UN Office
of Drugs and Crime (UNODC). The GPML is a research and assistance project with
the goal of increasing the effectiveness of international action against money
laundering by offering technical expertise, training and advice to member
countries upon request. 2.3 THE FINANCIAL ACTION TASK FORCE The Financial
Action Task Force on Money Laundering (FATF), formed by G-7 countries in 1989,
is an intergovernmental body whose purpose is to develop and promote an
international response to combat money laundering. In October, 2001, FATF expanded
its mission to include combating the financing of terrorism. FATF is a
policy-making body, which brings together legal, financial and law enforcement
experts to achieve national legislation and regulatory AML and CFT reforms.
Currently, its membership consists of 34 countries and territories and two
regional organizations. Page 11 of 138 2.3.1 FATF 40+9 RECOMMENDATIONS FATF
adopted a set of 40 recommendations to prevent money laundering. These Forty
Recommendations constituted a comprehensive framework for AML and were designed
for universal application by countries throughout the world. Although not
binding as law upon a country, the Forty Recommendations was widely endorsed by
the international community including World Bank and IMF and relevant organizations
as the international standard for AML. The Forty Recommendations were initially
issued in 1990 and revised in 1996 and 2003 to take account of new developments
in money laundering and to reflect developing best practices internationally.
To accomplish its expanded mission of combating financing of terrorism FATF
adopted nine Special Recommendations in 2001. 2.3.2 FATF NEW STANDARDS FATF
Plenary has again revised its recommendations in February 2012. The previous
40+9 Recommendations has been accumulated into 40 (forty) recommendations
called the FATF Standards. Proliferation financing has been included in the new
standards. There is no special recommendation to address the financing of
terrorism. All special recommendations have been merged with the 40
recommendations. FATF is now working on the assessment process under the new
standards. The following table shows the summary of new standards. Summary of
new FATF 40 standards is shown in Table A Group Topic Recommendations 1
Policies and Coordination 1-2 2 Money Laundering and Confiscation 3-4 3
Terrorist Financing and Financing of Proliferation 5-8 3 Preventive Measures
9-23 4 Transparency and Beneficial Ownership of Legal Persons and Arrangements
24-25 5 Power and Responsibilities of Competent Authorities and Other
Institutional Measures 26-35 6 International Co-operation 36-40 2.3.3
INTERNATIONAL COOPERATION AND REVIEW GROUP (ICRG) The FATF has set up the
International Co-operation Review Group (ICRG) as a new process that is
designed to notably engage those jurisdictions which are ‗unwilling‘ and pose a
real risk to the international financial system. The ICRG process is designed
to bind members of FATF and FATF Style Regional Body (FSRB) that show effective
commitment to the standards against those that evade their international
obligations. The time and money that one jurisdiction spend on creating an
effective system in that country is wasted if a neighbor remains a safe haven
for criminals. The ICRG process is focused on specific threats and specific
risk in specific countries. If needed, these jurisdictions may be publicly
identified by the FATF Plenary. Page 12 of 138 The second role of the ICRG is
to work with those jurisdictions to convalesce the shortcomings underpinning
the judgment of the FATF Plenary. This means there could be a focused follow up
process between the ICRG and a specific jurisdiction. If all evaluation reviews
and regular follow ups are conducted properly, there should be no duplication
or conflict within the FATF family and between the follow up processes. 2.4
ASIA PACIFIC GROUP ON MONEY LAUNDERING (APG) The Asia Pacific Group on Money
Laundering (APG), founded in 1997 in Bangkok, Thailand, is an autonomous and
collaborative international organization consisting of 41 members and a number
of international and regional observers. Some of the key international
organizations who participate with, and support, the efforts of the APG in the
region include the Financial Action Task Force, International Monetary Fund,
World Bank, OECD, United Nations Office on Drugs and Crime, Asian Development
Bank and the Egmont Group of Financial Intelligence Units. APG is the FATF
style regional body (FSRB) for the Asia Pacific region. APG members and
observers are committed to the effective implementation and enforcement of
internationally accepted standards against money laundering and the financing
of terrorism, in particular the Forty Recommendations of the Financial Action
Task Force on Money Laundering and Terrorist Financing. The APG has five key
roles: to assess compliance by APG
members with theØ
global standards through a robust mutual evaluation program; to coordinate bi-lateral and donor-agency
technical assistance and training inØ
the Asia/Pacific region in order to improve compliance by APG members with the
global standards; to participate in, and
co-operate with, the international anti-moneyØ
laundering network - primarily with the FATF and with other regional antimoney
laundering groups; to conduct research
and analysis into money laundering and terroristØ
financing trends and methods to better inform APG members of systemic and other
associated risks and vulnerabilities; and to contribute to the global policy development
of anti-money laundering andØ
counter terrorism financing standards by active Associate Membership status in
the FATF. The APG also assists its members to establish coordinated domestic
systems for reporting and investigating suspicious transaction reports and to
develop effective capacities to investigate and prosecute money laundering and
the financing of terrorism offences. Page 13 of 138 2.5 THE EGMONT GROUP OF
FINANCIAL INTELLIGENCE UNITS In 1995, a number of governmental units of
different countries commonly known as Financial Intelligence Units (FIUs) began
working together and formed the Egmont Group of FIUs (Egmont Group), named
after the location of its first meeting at the EgmontArenberg Palace in
Brussels. The purpose of the group is to provide a forum for FIUs to improve
support for each of their national AML programs and to coordinate AML
initiatives. This support includes expanding and systematizing the exchange of
financial intelligence information, improving expertise and capabilities of
personnel, and fostering better communication among FIUs through technology,
and helping to develop FIUs worldwide. The mission of the Egmont Group has been
expanded in 2004 to include specifically financial intelligence on terrorist
financing. To be a member of the Egmont Group, a country‘s FIU must first meet
the Egmont FIU definition, which is- 'a central, national agency responsible
for receiving (and, as permitted, requesting), analyzing and disseminating to
the competent authorities, disclosures of financial information: concerning suspected proceeds of crime and
potential financing of terrorism, orØ
required by national regulation, in
order to counter money laundering and terroristØ
financing.' 2.6 THE BASEL COMMITTEE ON BANKING SUPERVISION The Basel Committee
on Banking Supervision (Basel Committee) was formed in 1974 by the central bank
governors of the Group of 10 (ten) countries. Each country is represented by
their central banks, or by the relevant authorities with formal responsibility
for prudential supervision of banking where that authority is not the central
bank. The committee has no formal international supervisory authority or force
of law. Rather, it formulates broad supervisory standards and guidelines and
recommends statements of best practices on a wide range of bank/financial
institution supervisory issues. These standards and guidelines are adopted with
the expectation that the appropriate authorities within each country will take
all necessary steps to implement them through detailed measures, statutory,
regulatory or otherwise, that best suit that country‗s national system. Basel
Committee has adopted 29 'Core Principles for Effective Banking Supervision' on
September, 2012. Three of the Basel Committee‗s supervisory standards and
guidelines related to AML&CFT issues. 2.6.1 STATEMENT OF PRINCIPLES ON
MONEY LAUNDERING In 1988, the Basel Committee issued its Statement on
Prevention of Criminal Use of the Banking System for the Purpose of Money
Laundering (Statement on Prevention). The Statement on Prevention outlines
basic policies and procedures that managements of banks/FIs should undertake to
assist in suppressing money laundering. There are essentially four principles
contained in the Statement on Prevention: Page 14 of 138 proper customer identification;Ø high ethical standards and compliance with
laws;Ø cooperation with law enforcement authorities;
andØ policies and procedures to adhere to the
statement.Ø
2.6.2 BASEL CORE PRINCIPLES FOR BANKING In 1997, the Basel Committee issued its
Core Principles for Effective Banking Supervision (Core Principles), which
provide a comprehensive blueprint for an effective bank supervisory system and
covers a wide range of topics. These Core Principles were reviewed in September
2012 and adopted 29 Core Principles. The 29th principle deals with money laundering;
it provides that- 'The supervisor determines that banks have adequate policies
and processes, including strict customer due diligence rules to promote high
ethical and professional standards in the financial sector and prevent the bank
from being used, intentionally or unintentionally, for criminal activities.'
2.6.3 CUSTOMER DUE DILIGENCE In October, 2001, the Basel Committee issued an
extensive paper on KYC principles, entitled Customer Due Diligence for
banks/FIs (Customer Due Diligence). This paper was issued in response to noted
deficiencies in KYC procedures on a world-wide basis. These KYC standards build
upon and provide more specific information on the Statement on Prevention and
Core Principle 15. Page 15 of 138 MAJOR NATIONAL AML & CFT INITIATIVES 3.1
INTRODUCTION In line with international efforts, Bangladesh has also taken many
initiatives to prevent money laundering and combating financing of terrorism
and proliferation of weapons of mass destructions considering their severe
effects on the country. 3.2 FOUNDING MEMBER OF APG Bangladesh is a founding
member of Asia Pacific Group on Money Laundering (APG) and has been
participating annual plenary meeting since 1997. APG is a FATF style regional
body that enforces international standards in Asia Pacific region. As a member
of APG, Bangladesh is committed to implement FATF's 40 recommendations.
Bangladesh has formally endorsed by the APG Membership out-of-session in
September 2014 as the Co-Chair for 2018-2020. Bangladesh hosted the 13th APG
Typologies Workshop in 2010 and will also host the APG Annual Meeting of 2016.
3.3 LEGAL FRAMEWORK Bangladesh is the first country in the South Asia that has
enacted Money Laundering Prevention Act (MLPA) in 2002. To address the
shortcomings of the MLPA, 2002 and to meet the international standards
Bangladesh enacted Money Laundering Prevention Ordinance (MLPO) in 2008 which
was replaced by MLPA, 2009 by the parliament in 2009. To address the
deficiencies identified in the Mutual Evaluation Report (MER), Bangladesh has
again enacted Money Laundering Prevention Act in February, 2012 repealing
MLPA,2009. Money Laundering Prevention Rules, 2013 has been framed for
effective implementation of the act. Bangladesh also enacted Anti Terrorism
Ordinance (ATO) in 2008 to combat terrorism and terrorist financing.
Subsequently, ATO, 2008 has repealed by Anti-Terrorism Act (ATA), 2009 with the
approval of the parliament. To address the gap identified in the Mutual
Evaluation Report (MER) of Bangladesh that is adopted in 2009 by APG, some
provisions of ATA 2009 have been amended in 2012 and 2013. Anti-Terrorism
Rules, 2013 has also been promulgated to make the role and responsibilities of
related agencies clear specially to provide specific guidance on the
implementation procedure of the provisions of the UNSCRs. Bangladesh has
enacted Mutual Legal Assistance in Criminal Matters Act, 2012 to enhance
international cooperation on ML & TF and other related offences. The
Government also enacted Mutual Legal Assistance in Criminal Matters Rules, 2013
which mainly emphasize on the process of widest possible range of providing
mutual legal assistance in relation to ML & TF and other associated
offences. Page 16 of 138 3.4 CENTRAL AND REGIONAL TASKFORCES The Government of
Bangladesh has formed a Central and 7 regional taskforces (Chittagong,
Rajshahi, Bogra, Sylhet, Rangpur, Khulna and Barisal) on 27 January, 2002 to
prevent illegal hundi activities, illicit flow of fund & money laundering
in Bangladesh. The Deputy Governor of BB and head of BFIU is the convener of
that committee. Both the task force‘s meeting is held bi-monthly. The meeting
minutes of the regional task force are discussed in the central task force
meeting. Besides high profile cases are discussed in the central task force
meeting. The central task force set out important decisions that are
implemented through banks, financial institutions and Government agencies
concerned. 3.5 ANTI-MONEY LAUNDERING DEPARTMENT Anti-Money Laundering
Department (AMLD) was established in Bangladesh Bank in June, 2002 which worked
as the FIU of Bangladesh. It was the authority for receiving, analyzing and
disseminating Suspicious Transaction Reports (STRs) and Cash Transaction
Reports (CTRs). 3.6 BANGLADESH FINANCIAL INTELLIGENCE UNIT As per the provision
of MLPA, 2012 Bangladesh Financial Intelligence Unit (BFIU) has been
established abolishing AMLD as a national central agency to receive, analyze
and disseminate STRs/SARs, CTRs and complaints. BFIU has been entrusted with
the responsibility of exchanging information related to ML & TF with its
foreign counterparts. The main objective of BFIU is to establish an effective
system for prevention of money laundering, combating financing of terrorism and
proliferation of weapons of mass destruction and it has been bestowed with
operational independence. BFIU has also achieved the membership of Egmont Group
in July, 2013. BFIU has continued its effort to develop its IT infrastructure
which is necessary for efficient and effective functioning of the unit. In this
regard, it has procured goAML software for online reporting and software based
analysis of CTRs and STRs. It also has established MIS to preserve and update
all the information and to generate necessary reports using the MIS. 3.7
NATIONAL COORDINATION COMMITTEE AND WORKING COMMITTEE To provide guidance for
effective implementation of AML & CFT regime, a National Coordination
Committee headed by the Honorable Finance Minister and a Working Committee
headed by the Secretary of Bank and Financial Institutions Division of Ministry
of Finance were formed consisting representatives from all concerned
Ministries, Agencies and regulatory authorities. Page 17 of 138 3.8 NATIONAL ML
& TF RISK ASSESSMENT (NRA) Bangladesh first conducted National ML & TF
Risk Assessment (NRA) in 2011-2012. The methodology used for NRA was developed
by ACC, BFIU and CID of Bangladesh Police consulting with Strategic
Implementation Plan (SIP) of World bank. The report was prepared by using the
last 10 years statistics from relevant agencies and identified the
vulnerabilities of sectors, limitations of legal framework and weaknesses of
the institutions on ML & TF. Second NRA has been conducted by a ‗core
committee‘ comprises of ACC, BFIU and CID of Bangladesh Police and another
‗working committee‘ comprises of 23 members. This report considers the output
of institutional, sectoral, geographical risk assessment. It covers all the
sectors of the economy, legal and institutional framework. The report
identifies some high risk areas for Bangladesh that are corruption,
fraud-forgery, drug trafficking, gold smuggling and human trafficking. Banks,
non-banks financial institutions, real estate developers and jewelers were
identified as most vulnerable sectors for ML & TF. The foreign donation
receiving NGO/NPO working in the coastal or border area were identified as
vulnerable for TF incidence. 3.9 NATIONAL STRATEGY FOR PREVENTING ML AND TF
National Strategy for Preventing Money Laundering and Combating Financing of
Terrorism,2011-2013 was adopted by the NCC in April 2011. Bangladesh has
completed all the action items under the 12(twelve) strategies during that
time. A high level committee headed by the Head of BFIU and Deputy Governor of
Bangladesh Bank has formulated the National Strategy for Preventing Money
Laundering and Combating Financing of Terrorism 2015-2017 which has been
approved by the National Coordination Committee (NCC) on ML/TF. The strategy
identifies the particular action plan for all the Ministries, Division and Agency
to develop an effective AML/CFT system in Bangladesh. The strategy consists of
following 11 (eleven) strategies against 11 (eleven) strategic objectives: updating National MLØ&TF Risk Assessment Report
regularly and introducing Risk Based Approach of monitoring and supervision of
all reporting organizations. deterring
corruption induced money laundering considering corruption as a high risk.Ø modernization of Border Control Mechanism and
depriving perpetrators from use ofØ
proceeds of crime to prevent smuggling of gold and drugs, human trafficking,
other transnational organized crimes considering the risk thereon. tackling illicit financial flows (IFF) by
preventing the creation of proceeds of crime,Ø
curbing domestic and cross-border tax evasion and addressing trade based money
laundering. discouraging illicit fund
transfer by increasing pace of stolen assets recoveryØ initiatives and or recovering
the evaded tax. enhancing the capacity
of BFIU in identifying and analyzing emerging MLØ
& TF cases including ML&TF risks arising from the use of new
technologies. enhancing compliance of
all reporting agencies with special focus on new reportingØ agencies like NGOs/NPOs
and DNFBPs. Page 18 of 138 expanding
investigative capacity and improving the quality of investigation andØ prosecution of ML &
TF cases to deter the criminals. establishing identification and tracing out
mechanism of TFØ&PF
and fully implementation of targeted financial sanctions related to TF & PF
effectively. boosting national and international
coordination both at policy and operational levels.Ø developing a transparent, accountable and
inclusive financial system in Bangladesh.Ø
3.10 CHIEF ANTI-MONEY LAUNDERING COMPLIANCE OFFICERs (CAMLCO) CONFERENCE
Separate annual conferences for the Chief Anti-Money Laundering Compliance
Officers (CAMLCO) of Banks, Financial Institutions, Insurance Companies and
Capital Market Intermediaries were arranged by BFIU. It also has arranged a
number of training programs, workshops, seminars and road-shows to create
awareness among the staff of reporting organizations, regulatory authorities
about related issues. 3.11 EGMONT GROUP MEMBERSHIPS BFIU has achieved the
membership of Egmont group in the Egmont plenary on July, 2013 in Sun City,
South Africa. Through Egmont membership, BFIU has achieved access to a wider
global platform and this will help to establish relationship with other FIUs of
different countries to get benefit by exchanging views, experiences and
information via Egmont Secure Web. 3.12 ANTI MILITANTS AND DE-RADICALIZATION
COMMITTEE The Government of Bangladesh is very much vigilant against terrorism
and violent extremism. An inter-ministerial committee headed by Minister of
Home is working actively to prevent and redress of terrorism, to fight against
terrorist and the terrorist organizations in a more coordinated way. The
committee comprised of high officials from different ministries, law
enforcement and intelligence agencies. The committee tried to find out more
sensitive and sophisticated ways to create awareness among the general people
about the negative impact of terrorism. 3.13 MEMORANDUM OF UNDERSTANDING (MOU)
BETWEEN ACC AND BFIU Anti Corruption Commission (ACC) and the Bangladesh
Financial Intelligence Unit (BFIU) has signed a Memorandum of Understanding
(MoU) on 4 May, 2014 with a view to increasing the scope of cooperation for
dealing with money laundering and other financial crimes. The ACC and the BFIU
have jointly undertaken various initiatives to fight against money laundering and
other financial crimes. Page 19 of 138 3.14 IMPLEMENTATION OF TFS UN Security
Council Resolutions related to TF adopted under Chapter VII of the Carter of UN
are mandatory for all jurisdictions including Bangladesh. Bangladesh has issued
Statutory Regulatory Order (SRO) No. 398/2012 on 29 November 2012, which was
amended and strengthened by SRO No. 188/2013 dated 18 June 2013 under the
United Nations (Security Council) Act, 1948. Before the issuance of those SROs,
BFIU was used to issue circular letters as a medium of instructions for the
reporting organization to implement the requirements of UNSCRs on regular
basis. In addition to the SROs the UNSCRs requirements were also incorporated
in the ATA, 2009. Section 20(A) of ATA, 2009 provides that the Government of
Bangladesh has power of taking measures for the purposes of implementing United
Nations Security Council Resolution No. 1267 and its successor resolutions and
United Nations Security Council Resolution No. 1373 and United Nations Security
Council resolutions related to the prevention, suppression and disruption of
proliferation of weapons of mass destruction and its financing 3.15 COORDINATED
EFFORT ON THE IMPLEMENTATION OF THE UNSCR A national committee is coordinating
and monitoring the effective implementation of the United Nations Security
Council Resolutions (UNSCR) relating to terrorism, terrorist financing and
financing of proliferation of weapons of mass destruction. The committee is
headed by the Foreign Secretary and comprises of representatives from Ministry
of Home Affairs; Bank and Financial Institutions Division, Ministry of Finance;
Legislative and Parliamentary Affairs Division, Ministry of Law, Justice and
Parliamentary Affairs and Bangladesh Bank. 3.16 RISK BASED APPROACH Mercantile
Bank has developed ‗Money Laundering and Terrorist Financing Risk Assessment
Guidelines‘ for identifying, assessing and mitigating ML & TF risks that
the bank may encounter in doing its businesses. The guideline outlines the
detail process to assess ML & TF risk u n d e r business risk considering
customers, products, delivery channels and geographical positions. The
guideline also include assessment of regulatory risk i.e. risk arises from
non-compliance of AML & CFT measures. This guideline will assist in
identifying the bank‘s AML/CFT risk profile. Understanding the risk profile
enables the bank to apply appropriate risk management process to the AML/CFT
compliance program to mitigate risk. The risk assessment process enables
management to better identify and mitigate gaps in bank‘s control. Page 20 of
138 The purpose of this guideline is to: provide general information about risks
related with the products, services, delivery·
channels, and geographical locations; assist banks to assess their ML·&TF risks efficiently;
enable banks in implementing an AML·&CFT program
appropriate to their business having regard to the business size, nature and
complexity; and provide a broad risk
management framework based on high-level principles and· procedures that a bank may wish
to consider when developing and implementing a risk-based approach to identify,
mitigate and manage ML&TF risks. 3.16.1 Risk Management Framework The risk
management framework consists of: a) Establishing the internal and external context
within which the designated service is, or is to be, provided. b) Risk
identification; c) Risk assessment or evaluation; and d) Risk treatment
(mitigating, managing, control, monitoring and periodic reviews). 3.16.1.1 Risk
identification There are two types of risk: business risk and regulatory risk.
Business Risks: Bank must consider the risk posed by any element or any
combination of the elements listed below: Customers§
Products and services§ Business practices/delivery methods or
channels§ Countries it does business in/with
(jurisdictions).§
Regulatory risks: This risk is associated with not meeting the requirements of
the Money laundering Prevention Act, 2012, Anti Terrorism Act, 2009 (including
all amendments) and instructions issued by BFIU. Examples of some of these
risks are: Customer/beneficial owner
identification and verification not done properly§
Failure to keep records properly§ Failure to scrutinize staffs/members properly
before appointed§ Failure to train staff adequately§ Not having an AML§&CFT program Page 21 of 138 Failure to report suspicious transactions or
activities§ Non submission of required report to BFIU
regularly§ Not having an AML§&CFT Compliance Officer Failure of doing Enhanced Due Diligence (EDD)
for high risk customers (i.e.,§
PEPs, IPs) Not complying with any order
for freezing or suspension of transaction issued by§ BFIU or BB Non submission accurate information or
statement requested by BFIU or BB.§
3.16.1.2 Risk assessment For assessing risk, we use Annex-A, which is a simple
& generic table with Risk Score and Treatment. Each risk element can be
rated by: - the chance of the risk happening – „likelihood‟ - the amount of
loss or damage if the risk happened – „impact‟ (consequence). Risk Score can be
found by blending likelihood and impact as follows: X = MBL use the risk matrix
shown in Table-D (see next page) to combine LIKELIHOOD and IMPACT to obtain a
risk score. The risk score is to be used to aid decision making and help in
deciding what action to take in view of the overall risk. Three levels of risk
(likelihood scale), three levels of impact and four levels of risk score are
shown in Table B, C and D respectively. Table B: Likelihood scale Frequency
Likelihood of an ML&TF risk Very likely Almost certain: it will probably
occur several times a year Likely High probability it will happen once a year
Unlikely Unlikely, but not impossible Table C: Impact scale Consequence Impact
– of an ML/TF risk Major Huge consequences – major damage or effect. Serious
terrorist act or large-scale money laundering. Moderate Moderate level of money
laundering or terrorism financing impact. Minor Minor or negligible
consequences or effects. Likelihood Impact Risk Level/ Score Page 22 of 138
Table D: Risk score table Rating Impact – of an ML&TF risk Extreme-4 Risk
almost sure to happen and/or to have very serious consequences. Response: Do
not allow transaction to occur or reduce the risk to acceptable level. High-3
Risk likely to happen and/or to have serious consequences. Response: Do not
allow transaction until risk reduced. Medium-2 Possible this could happen
and/or have moderate consequences. Response: May go ahead but preferably reduce
risk. Low-1 Unlikely to happen and/or have minor or negligible consequences. Response:
Okay to go ahead. 3.16.1.3 Risk Treatment Risk treatment is about identifying
and testing methods to manage the risks the bank has identified and assessed in
the previous process. In doing this, bank needs to consider putting into place
strategies, policies and procedures to help reduce (or treat) the risk. Based
on the set strategies, policies and procedures and risk type & level &
magnitude, risk treatment or action is identified for each risk (Annex-A).
3.16.1.4 Risk Monitor and review Keeping records and regular evaluation of the
risk plan and AML&CFT program is essential. The risk management plan and
AML&CFT program cannot remain static as risks change over time; for
example, changes to customer base, products and services, business practices
and the law. Once documented, the entity should develop a method to check
regularly on whether AML&CFT program is working correctly and well. If not,
the entity needs to work out what needs to be improved and put changes in
place. This will help keep the program effective and also meet the requirements
of the AML&CFT Acts and respective Rules. 3.16.1.5 Additional tools to help
risk assessment The following tools or ideas can be useful in helping to manage
risk. It can be included in the previous risk assessment process so that the
decisions are to be better informed. Applying risk appetite to risk assessment
Risk appetite is the amount of risk a bank is prepared to accept in pursuit of
its business goals. Risk appetite can be an extra guide to the risk management
strategy and can also help deal with risks. It is usually expressed as an
acceptable/unacceptable level of risk. Some questions to ask are: ● What risks
will the bank accept? ● What risks will the bank not accept? ● What risks will
the bank treat on a case by case basis? ● What risks will the bank send to a
higher level for a decision? Page 23 of 138 The risk matrix Table-E can be used
to show the risk appetite of the bank. In a risk-based approach to AML &
CFT the assessment of risk appetite is a judgment that must be made by the
bank. It will be based on its business goals and strategies, and an assessment
of the ML&TF risks it faces in providing the designated services to its
chosen markets. Table -E: Risk Matrix LIKELIHOOD (What is the chance it will happen?)
IMPACT (How serious is the risk?) Risk tolerance In addition to defining bank‘s
risk appetite, the entity can also define a level of variation to how it
manages that risk. This is called risk tolerance, and it provides some
flexibility whilst still keeping to the risk framework that has been developed.
3.17 MEMORANDUM OF UNDERSTANDING (MOU) BFIU AND OTHER FIUs To enhance the
cooperation with foreign counterparts, BFIU signed Memorandum of Understanding
(MoU) with other FIUs. BFIU has signed 36 (till date) MoU so far to exchange
the information related to ML&TF with FIU of other countries. Very Likely
Acceptable Risk Medium 2 Unacceptable Risk High 3 Unacceptable Risk Extreme 4
Likely Acceptable Risk Low 1 Acceptable Risk Medium 2 Unacceptable Risk High 3
Unlikely Acceptable Risk Low 1 Acceptable Risk Low 1 Acceptable Risk Medium 2
Minor Moderate Major Page 24 of 138 AML & CFT COMPLIANCE PROGRAM OF
MERCANTILE BANK LIMITED 4.1 INTRODUCTION To prevent ML, TF & PF and to
ensure the implementation of required provisions of Acts, Rules and directives
of BFIU, Mercantile Bank Limited has developed and maintained an effective AML
and CFT compliance program covering senior management role, internal policies,
procedures and controls, compliance structure including appointment of
compliance officer, independent audit function and awareness building. 4.2
COMPONENT OF AML & CFT COMPLIANCE PROGRAM The following components have
been included into AML & CFT compliance program of MBL: 1. senior
management role including their commitment to prevent ML, TF & PF; 2.
internal policies, procedure and controls- it will include Bank‘s AML & CFT
policy, customer acceptance policy, customer due diligence (CDD), transaction
monitoring, cash transaction reporting, suspicious transaction reporting, self
assessment, independent testing procedure, employee screening, record keeping
and reporting to BFIU; 3. compliance structure includes establishment of
central compliance Unit (CCU), Anti Money Laundering Department, appointment of
chief anti-money laundering compliance officer (CAMLCO), branch anti-money
laundering compliance officer (BAMLCO); 4. independent audit function- it
includes the role and responsibilities of internal audit on AML & CFT
compliance and external audit function; 5. awareness building program includes
training, workshop, seminar for banks employees, member of the board of
directors, owners and above all for the customers on AML & CFT issues. 4.3
DEVELOPMENT OF BANK‘S AML & CFT COMPLIANCE PROGRAM In order to develop the
compliance program, MBL has considered all relevant laws, regulations,
guidelines relating to AML & CFT and also the practices related to
corporate governance. The compliance program has been finalized by members of
Central Compliance Unit (CCU) of MBL. 4.4 COMMUNICATION OF COMPLIANCE PROGRAM
MBL communicates their compliance program after getting the approval from the
board of directors or senior management to all of our employees, member of the
board of the directors and other relevant stakeholders at home and abroad on
following communicating modes: 1. Issuance of AML Circular, 2. Conducting AML
& CFT related training program, 3. Issuance of letters, 4. Uploading the
compliance program in the website etc. Page 25 of 138 4.5 SENIOR MANAGEMENT ROLE
The most important element of a successful AML & CFT program is the
commitment of senior management, including the chief executive officer and the
board of directors, to the development and enforcement of the AML & CFT
objectives which can deter criminals from using their banks for ML, TF &
PF, thus ensuring that they comply with their obligations under the laws and
regulations. Regarding senior management role of preventing ML, TF & PL,
Anti Terrorism Act (ATA) – 2009 & BFIU Circular No. 10 dated 28.12.2014 state
that The Board of Directors, or in the
absence of the Board of Directors, the Chief·
Executive of each reporting organization shall approve and issue directions
regarding the duties of its officers, and shall ascertain whether the
directions issued by Bangladesh Bank under section 15 of ATA, which are
applicable to the reporting agency, have been complied with or not. · All banks must have their
own policy manual that must conform international standards, laws and
regulations in force in Bangladesh and instructions of BFIU on preventing money
laundering and terrorist financing, and this policy manual must be approved by
their Board of Directors or by the highest management committee, where
applicable. This policy manual shall be communicated to all concerned persons.
Banks shall conduct review of the policy manual from time to time and shall
amend/change where necessary. The chief executive of the bank shall announce
effective and specific commitment, give the necessary instructions to fulfill
the commitments in preventing ML & TF to all the employees of all branches,
agent offices, regional offices and the head office and shall ensure the
implementation of the commitments. This statement of commitment shall be issued
in every year. In terms of preventing ML, TF & PF, Senior Management of
Mercantile Bank Limited (MBL) includes- 1. the Members of the Board of
Directors of the Bank and 2. the Managing Director & CEO of the Bank.
Senior Management of MBL has the accountability to ensure that the bank‘s policy,
process and procedures towards AML & CFT are appropriately designed and
implemented and are effectively operated to minimize the risk of the bank being
used in connection with ML & TF. Senior Management of MBL will adopt HR
Policy for ensuring the compliance of AML & CFT measures by the employees
of the bank. The Board of Directors of MBL shall- approve AMLØ
& CFT compliance program and ensure its implementation; issue directives to ensure compliance with the
instruction of BFIU issued under sectionØ
15 of ATA, 2009; take reasonable
measures through analyzing self assessment report and independentØ testing report summary; understand MLØ
& TF risk of the bank, take measures to mitigate those risk; MDØ
& CEO shall issue statement of commitment to prevent ML, TF & PF in the
bank; Ensure compliance of AMLØ & CFT program; Allocate enough human resource and other
logistics to effective implementation ofØ
AML & CFT compliance program. Page 26 of 138 Senior Management of MBL shall
clearly send the signal that the corporate culture is as concerned about our
reputation as it is about profits, marketing and customer service. As part of
our AML & CFT Policy the Bank will communicate clearly to all employees on
an annual basis by a statement from the MD & CEO that it clearly sets forth
its policy against ML, TF & PF and any activity which facilitates money
laundering or the funding of terrorist or criminal activities. Such a statement
would be an evidence of the strong commitment of the Bank and its Senior Management
to comply with all laws and regulations designed to combat money laundering and
terrorist financing. The statement of commitment of Managing Director & CEO
of MBL will include the following issues: All employees of the Bank are required to
comply with applicable laws andØ
regulations and corporate ethical standards; Clear indication of balance between business
and compliance, risk andØ
mitigating measures; Complying with
rules and regulations is the responsibility of each individual inØ the Bank in the normal
course of their assignments. Ignorance of the rules and regulations is no
excuse for non-compliance; Point of
contact for clarification in case of ambiguity arises;Ø Consequences of non-compliance as per Human
Resources (HR) Policy of MBL;Ø
Bank‘s policy or strategy to prevent ML,
TFØ & PF. Senior
Management of MBL will ensure the adequate human and other resources committed
to AML & CFT. Moreover, they will ensure the autonomy of the designated
officials related to AML & CFT. Senior management will take the report from
the Central Compliance Unit (CCU) into consideration which will assess the
operation and effectiveness of the Bank‘s systems and controls in relation to
manage ML & TF risk and take any necessary action to remedy the deficiencies
identified by the report in a timely manner. Senior management of MBL will
ensure that some potential directions have been included in Bank‘s HR Policy
for ensuring the compliance of AML & CFT measures by the employees of the
Bank. Inclusion of potential guidelines regarding AML & CFT measures in MBL
HR Policy: In order to comply with AML & CFT measures of the anti money
laundering guideline of Bangladesh Bank, some important attributes of
non-compliance issues and necessary punitive actions for not complying with
those issues are furnished below: I. Non-compliance of AML & CFT measures:
There are some important measures with which employees should be complied fully
to avoid the probable risks relating with AML & CFT issues as directed in
ML & TF Risk Management Guidelines of BFIU. The actions to be considered as
non-compliance of AML & CFT measures are stated below: Opening account without KYC or incomplete KYC,§ Ignoring update of Transaction Profile which
does not match the current volume§
of business transaction. Inputting
erroneous§
& unjustified information in Account Opening Form Not providing correct information in time
according to Regulatory bodies§
& HO instruction Page 27 of 138 Not
taking permission before opening of PEPs§
& Influence Person‘s account. Not
sending correct CTR in time with forwarding§
Failure to keep essential record in a
sequential and proper order for the purpose of§
presenting before Audit & inspection team Not checking the UN Security Council and
domestic sanction list while opening account§
Not updating the customer‘s KYC before
approving loan proposal§
Failure to monitor continuously that
whether loan amount is diverted to unethical or§
unlawful business or not. The above “ non-compliance of AML & CFT measures”
has been included into the Chapter-VIII, General Conduct and Discipline of HR
Policy Manual(Revised-2014 as Clause#8.1.N Actions against non-compliance: If
any employee of our bank is found reluctant to comply with the AML & CFT
measures, he /she may be awarded punishment in the proportionate manner. The
risk of not following proper procedure on AML or CFT issues cannot be
overlooked. The person held responsible for adopting the actions which are
against potential compliance issues is subject to following punishment: i.
Show-cause notice ii. Suspension from the work iii. Increment held up iv.
Halting promotion v. Financial compensation vi. Termination of job (in terms of
extreme case and repeatedly ignoring compliance issues) vii. Legal action (in
the court of law) against the concerned employee (where applicable). Action
mentioned above shall be proportionate to the severity of non
compliance/offence. The “administrative actions against non-compliance of AML
& CFT measures” has been included Chapter-IX, Disciplinary Action of HR
Policy Manual (Revised)-2014 as Clause # 9.1.1.m. II. Performance evaluation of
employees: Proper weight or score shall be given on the annual performance
evaluation of employees for extra ordinary preventive action vis-a-vis
non-compliance: In ACR (Annual
Confidential Report) a significant percentage of total score§ must be retained
regarding AML & CFT compliance issues. AML§
& CFT measures being vital compliance issues must be considered in the
promotion and other calculation of awards given by the bank. The performance report of every single
employee must include the score or§
marking arrangement on AML & CFT measures. The scoring may be projected in
the following manner: Description work/ actions Score Total Receiving of
Training on AML & CFT measures 1 5 Knowledge of AML guidelines & policy
2 Knowledge of AML circulars of Mercantile Bank and reporting to the concerned
authorities 1 Co-operation with the action of BAMLCO 1 Page 28 of 138 III.
Recovering the fined amount: When any fine is imposed on bank by the BFIU,
written procedure to recover the fined amount will be clearly mentioned in the
HR policy for the presentation of better compliance related actions. If BFIU, Bangladesh Bank imposes any fine for
the lapses of officials ignoring§
due diligence, the Human Resource Division may realize the whole portion of
loss from those employees who will be responsible after proper investigation as
per HR Policy Manual. “Recovery fined amount” has been included into
Chapter-IX, Disciplinary Action of HR Policy Manual (Revised)-2014 as Clause #
9.1.2.A.iv. Senior management must be responsive of the level of money
laundering and terrorist financing risk when the bank is exposed to and take a
view whether the bank is equipped to mitigate that risk effectively; this
implies that decisions on entering or maintaining high-risk business
relationships must be escalated to senior management. 4.6 POLICIES AND
PROCEDURES Our AML & CFT policy included the following 4 (four) key
elements; - High level summary of key
controls;§ Objective of the policy (e.g. to protect the
reputation of the institution);§
Scope of the policy (A statement
confirming that the AML/CFT policy§
applies to all areas of the business); and Waivers and exceptions- procedures for
obtaining exemptions from any aspects§
of the policy should be carefully controlled; and Operational controls 4.7
CUSTOMER ACCEPTANCE POLICY (CAP): Customer is the key to success as a whole for
the financial institutions but contrary to it is a recipe for failure. In the
Country, Commercial Bank does not open account or deal with customer of unknown
identify or have fictitious or imaginary names. Bank will accept only those
clients whose identity is established by conducting due diligence appropriate
to the risk profile of the client. Mercantile Bank has developed a clear
Customer Acceptance Policy laying down explicit criteria for acceptance of
customers. To thwart exposure of our bank to any sort of risk due to inadequate
understanding our CAP has ensured explicit guidelines in setting up any kind of
business relation with customer. Mercantile Bank prepared a well defined
customer acceptance policy to ensure prompt and inclusive services to all
customers within the prescribed regulatory framework as well as defined
processes of the Bank. In this regard the Management of Mercantile Bank has
also recommended certain important themes under the guidance of Bangladesh Bank
which have been incorporated to design the policy towards comprehensive
coverage and implementation of customer acceptance in the Bank. Page 29 of 138
OBJECTIVES/PURPOSE AND APPLICATION OF THE POLICY: The primary objective of the
Customer Acceptance Policy are- 1. to manage any risk that the services
provided by the Bank may be exposed to; 2. to prevent the Bank from being used,
intentionally or unintentionally, for ML/TF purposes; and 3. to identify
customers who are likely to pose a higher than average risk. The CAP has been
designed and developed considering the following factors and guiding principal:
I. To prevent illegal or criminal elements from using the Bank for money
laundering activities II. To enable the Bank to know/understand the customers
and their financial dealings better which, in turn, would help the Bank to
manage risks prudently III. To put in place appropriate controls for detection
and reporting of suspicious activities in accordance with applicable laws or
laid down procedures. IV. To comply with applicable laws and regulatory
guidelines V. To ensure that the concerned staffs are adequately trained in
KYC, AML, CFT procedures. The customer acceptance policy of MBL shall not be
used against the disadvantaged people or the people who have not proper
identification document. Our customer acceptance policy is expected to encourage
the ultimate goal of transparent, accountable and inclusive financial system in
Bangladesh. This policy is applicable to all domestic/foreign
Branches/offices/subsidiaries of the Bank and is to be read in conjunction with
related operational guidelines issued from time to time. Mercantile Bank has
followed detailed and accurate customer identification procedure for opening of
accounts and monitoring transactions of suspicions nature for the purpose of
reporting it to be appropriate authority.. Detailed guidelines based on the
Recommendations of the FATF and the paper issued on Customer Due Diligence
(CDD) for Banks by Basel Committee on Banking Supervision, with indicative
suggestions wherever considered necessary, have been issued. DEFINATION OF
CUSTOMER: A ‗Customer‘ is defined as: A
person or entity that maintains an account and/or has a business relationship· with the bank; One on whose behalf the account is maintained
(i.e. the beneficial owner) means·
the natural person who ultimately owns or controls a client and or the person
on whose behalf a transaction is being conducted, and Exercise ultimate effective control over a
juridical person· Beneficiaries of transactions conducted by
professional intermediaries, such as·
Stock Brokers, Chartered Accountants, Solicitors etc. as permitted under the
law, and Page 30 of 138 any person or
entity connected with a financial transaction which can pose· significant reputational
or other risks to the bank, say, a wire transfer or issue of a high value
demand draft as a single transaction. For the purpose of KYC Procedure a
―Customer‖ is defined in BFIU circular No. 10 dated 28/12/2014, as: any person or institution maintaining an
account of any type with a bank or·
financial institution or having banking related business; the person or institution as true beneficial
owner in whose favor the account is·
operated; the true beneficial owner of
the transaction of the accounts operated by the·
professional intermediaries (such as lawyer/law firm, chartered accountant,
etc) under the existing legal infrastructure; high value single transaction conducted in a
single Demand Draft, pay order,·
Telegraphic Transfer by any person or institution or any person/institution involved
in a financial transaction that may pose reputational and other risks to the
institution. ln this case if a transaction appears abnormal in relation to the
usual transaction of the concerned person or institution that transaction will
be treated as –―high value‖. While preparing CAP policies the following
important factors have been taken into consideration: i) Customer‘s background
ii) Country of origin iii) Public or high profile position iv) Linked accounts
v) Volume of business activities vi) Risks associated in the business of
customers vii) Other risk indicators viii) Basic requirements for Account
Opening ix) All information available for judging the creditworthiness of
borrowers. x) All information on walk-in customers as required in AML circular
Customers are vitally important for banking business. Our motto is to extend
best services to our customers. We are also aware that sometimes customers pose
the risk of money laundering and financing of terrorism to the financial
institutions particularly the banks. So the inadequacy or absence of KYC
standards can result in serious customer and counterpart risks, especially
reputation, operational, legal and compliance risks. Collecting sufficient
information about our customers is the most effective defense against being
used as the medium to launder the proceeds of crimes and to finance the
terrorism through bank accounts. As per Sec. 25 of Money Laundering Prevention
Act- 2012 MBL requires to keep satisfactory evidence of the identity of those
it deals with and also requires making necessary arrangement to prevent any
transaction Page 31 of 138 related to crimes as described in Anti Terrorism
(Amendment) Act- 2012. It is also the responsibility of our Bank to identify
suspicious transactions of their customers with due care and diligence. It is
important that the customer acceptance policy is not so restrictive that it
results in a denial of access by the general public to financial services,
especially for people who are financially or social disadvantaged. On the other
hand, quite extensive due diligence would be essential for an individual with a
high net worth whose source of funds is unclear. Decisions to enter into
business relationships with higher risk customers, such as public figures or
politically exposed persons should be taken exclusively at senior management
level. The following Customer Acceptance Policy is indicating the criteria for
acceptance of customers of our bank. Branch shall accept customer strictly in
accordance with the said policy: 1) No account should be opened in anonymous or
fictitious name. Branch will collect accurate & full name of clients and
preserve documents in conformity with it. Branch will prepare proper KYC of the
clients. 2) No numbered account shall be opened; 3) No banking relationship
shall be established with a Shell Bank; 4) No account in the name of any person
or entity listed under United Nations Security Council Resolutions (UNSCRs) or
their close alliance adopted under Chapter VII of the Carter of UN on suspicion
of involvement in terrorist or terrorist financing activities and proscribed or
enlisted by Bangladesh Government shall be opened or operated. This list can be
downloaded from the following web
linkhttp://www.un.org/sc/committees/index.shtml or http://www.bb.org.bd/aboutus/dept/bfiu/sanction_list.php
5) Branch will accept only those customers whose appropriate identity is
established by conducting due diligence to the risk profile of the client.
Parameters of risk perception should be clearly defined in terms of the source
of fund, the nature of business activity, location of customer and his clients,
mode of payments, volume of turnover, service offered, social and financial
status etc. to categorize customers into different risk grades; 6) Documents
requirements and other information to be collected in respect of different
categories of customers depending on perceived risk; 7) Not to open an account
or close an account where the bank is unable to apply appropriate customer due
diligence measures i.e. if the bank is unable to verify the identity and/or
obtain documents required as per with the risk categorization due to non
cooperation of the customer bank will not open or allow withdrawal of money.
Decision by a bank to close an account should be taken at a reasonably high
level after giving due notice to the customer explaining the reasons for such a
decision; Page 32 of 138 8) Circumstances, in which a customer is permitted to
act on behalf of another person/entity, should be clearly spelt out in conformity
with the established law and practices of financial service as there could be
occasions when an account is operated by a mandate holder or where an account
is opened by an intermediary in fiduciary Capacity; 9) Necessary checks before
opening a new account to ensure that the identity of the customer does not
match with any person with known criminal background or with banned entities
such as individual terrorists or terrorist organizations etc; 10) The status of
a customer may change as relation with a customer progresses. The transaction
pattern, volume of a customer's account may also change. With times an ordinary
customer can turn into a risky one. To address this issue, customer acceptance
policy should include measures to monitor customer's activities throughout the
business relation; 11) Uniform A/C Opening Forms, KYC Profile Form and
Transaction Profile Form developed in line with the guidelines of Bangladesh
Bank should be properly filled in; 12) In case of opening a Politically Exposed
Person (PEP) / Influential Person (IP) / Chief Executives or Top Level
Officials of any International Organization account, the branch shall comply
the instructions contained in BFIU Circular No. 10 dated 28.12.2014 issued by
Bangladesh Bank. Such types of account will be classified as high risk and will
be required very high level monitoring; 13) Source of funds, income or wealth
and complete information on the actual or beneficial owners of the accounts
holding 20% or more share of the account must be obtained at the time of
opening of any account; 14) In case of establishing correspondent banking
relationship, the branch /concerned division /department shall follow the
guidelines as contained in BFIU Circular No. 10 dated 28.12.2014 issued by
Bangladesh Bank meticulously; 15) In case of opening a account of Non Residents
Bangladeshi the rules of Foreign Exchange Regulation Act, 1947 and the
instructions under this rules promulgated by Bangladesh Bank have to be
followed. 16)Customers‘ risk must be assessed as per parameters of risk
perception as clearly defined in KYC Profile Form. 17) The branches, where
locker service facilities exist, will follow the identification procedure for
their customers. It is important to bear in mind by all employees of the bank that
the customer identification process does not end at the point of application.
Once account relationship has been established, reasonable steps should be
taken by the branch from time to time to ensure that descriptive information is
kept. Page 33 of 138 MBL will ensure comprehensive implementation of the above
policy as well as review of the same at regular interval through the Central
Compliance Unit (CCU), Anti Money Laundering Department of Mercantile Bank Ltd.
This will ensure strengthening the framework of Customer Acceptance. All
employees of MBL are instructed to be diligent in Banker- customer relationship
and seek the consent of senior officials of MBL in dealing with high-risk
customers. MBL always ensure high quality services at all levels, which we
strive to achieve certain quantitative goals. Care must be constantly exercised
not to compromise on quality. All Head of the Branches are required to follow
the Customer Acceptance Policy carefully and raise the Bank to greater heights
of efficiency, transparency and professionalism for complying the Money
Laundering Prevention Act 2012 and Anti Terrorism (Amendment) Act, 2012. Page
34 of 138 COMPLIANCE STRUCTURE OF THE BANK 5.1 INTRODUCTION Compliance
structure is an organizational setup that deals with AML & CFT compliance
of the bank and the reporting procedure. The Compliance structure of Mercantile
Bank includes- Central Compliance Unit
(CCU),Ø Anti Money Laundering Department (AMLD)Ø Chief Anti-Money Laundering Compliance Officer
(CAMLCO),Ø Branch Anti-Money Laundering Compliance
Officer (BAMLCO).Ø 5.2
ORGANIZATION STRUCTURE While complying with rules and regulations is the
responsibility of each individual of Mercantile Bank in the normal course of
their assignments, each individual of Head Office and Branches shall pay the
role as noted there against in the effectiveness of the AML program. 5.2.1
ORGANIZATIONAL CHART OF MERCANTILE BANK LIMITED FOR IMPLEMENTING AML/CFT
POLICY: Managing Director & CEO Chief Anti-Money Laundering Compliance Officer
(CAMLCO) All Head of Branches Concerned Desk Officer Head of AML Department
/Deputy CAMLCO Policy & Guidelines Unit Statements & Returns Unit
Compliance & Monitoring Unit Training & Development Unit CCU Branch
Anti-Money Laundering Compliance Officer (BAMLCO Board of Directors Managing
Director & CEO Chief Anti-Money Laundering Compliance Officer (CAMLCO) All
Head of Branches Concerned Desk Officer Head of AML Department /Deputy CAMLCO
Policy & Guidelines Unit Statements & Returns Unit Compliance & Monitoring
Unit Training & Development Unit CCU Branch Anti-Money Laundering
Compliance Officer (BAMLCO Page 35 of 138 5.3 CENTRAL COMPLIANCE UNIT (CCU) A
Central Compliance Unit has been formed at MBL‘s Head Office headed by
Additional Managing Director & CAMLCO. The following Heads of important
Division are the member of CCU: 01 Additional Managing Director & CAMLCO
Chairman 02 Head / Deputy Head of Credit Risk Management Division Member 03
Head of Human Resources Division Member 04 Head of International Division
Member 05 Head of Mobile Banking Division Member 06 Head of Information
Technology Division Member 07 Head of Risk Management Division Member 08 Head
of General Banking Division Member 09 Head of Anti Money Laundering Department
Member Secretary 5.3.1 FUNCTIONS OF THE CENTRAL COMPLIANCE UNIT (CCU): The CCU
shall give instruction to Anti Money Laundering Department for taking necessary
measures to prevent ML & TF. The member secretary of CCU will arrange
meeting with other members of CCU at least once in every quarter of a year. In
this meeting, members of CCU shall discuss the potential adaptation, effects
and applications of instructions given in the Anti Money Laundering Act-2012,
different circulars issued by BFIU, Bangladesh Bank , AML & CFT measure and
other applicable laws, policy, procedures and regulations. The terms of
reference of CCU are given below: The
Unit will undertake organizational strategy and program regarding internalØ control policies and
procedures to prevent money laundering and terrorist financing activities and
will ensure implementation of the same in the Bank The Unit will evaluate overall monitoring
process and observe changes of rulesØ
/regulations and directives of BFIU and international standards that require
revision/up gradation and adaptation. The Unit will ensure maintenance of regular
liaison with BFIU, BangladeshØ
Bank, External & Internal Auditors and other Law enforcing agencies through
CAMLCO/ DCAMLCO The Unit will ensure
that the Bank‘s AML policies and Risk AssessmentØ
Guideline under risk based approach are completed and updated. Page 36 of 138 The Unit will monitor performance of the
DCAMLCO in the head office levelØ
and BAMLCO in the branch level to ensure AML/CFT compliance. The Unit will monitor whether instruction
circulars issued by AML Division toØ
the branches regarding the procedure of transaction monitoring and internal
control mechanism to prevent money laundering and terrorist financing are being
followed. To monitor whether
correspondent relationship are maintained as per instructionØ provided by AMLD. The Unit will oversee whether Money Laundering
Prevention Act 2012, AntiØ
Terrorism Act 2013 and other directives issued by BFIU under these two acts are
being properly followed by the overseas branches and subsidiaries during
rendering the activities and services. The Unit will supervise whether due diligence
are being rendered in case ofØ
accounts of PEPs, IPs and chief or higher management of any International
Organization by BAMLCO. To oversee KYC,
responsibilities of ordering , intermediary and beneficiary bankØ and to update the list of
agents in the website of our Bank in case of Mobile Banking Services. To monitor /evaluate Independent Testing
Procedure to be conducted at leastØ
annually by our ICCD. To monitor
/evaluate effectiveness of Self-Assessment procedure on half yearlyØ basis Any other issue that may arise from time to
time regarding AML/CFT.Ø
The CCU shall issue instructions for the branches, where transaction monitoring
system, internal control system, policies and techniques will be included to
prevent Money Laundering and Terrorist Financing. The CCU will report to BFIU
without any delay in case of any account/business relationship found with any
person/entity whose name/names appeared to the mass media (TV/News Paper)
regarding ML, TF, PF or any predicate offences under MLPA, 2012. The CCU could
also make a Suspicious Transaction Report (STR) or Suspicious Activity report
(SAR) directly to BFIU in this regard. 5.4 FORMATION OF ANTI MONEY LAUNDERING
DEPARTMENT ( AMLD) Mercantile Bank has formed AMLD in the head office of the
bank as a unique department. DCAMLCO will be the Head of AMLD. The Bank shall
always ensure sufficient manpower and other logistic support in AMLD taking any
exception into consideration. The employees of the department shall remain
updated on AML & CFT measures including MLPA, ATA rules and instructions
issued by BFIU or Bangladesh Bank. 5.4.1 AUTHORITIES AND RESPONSIBILITIES OF
THE AMLD AMLD is the prime mover of MBL for ensuring the compliance of AML
& CFT measures. The main responsibilities of this department are furnished
below: develop banks policy, procedure
and strategies in preventing ML, TFØ
& PF; coordinate banks AMLØ & CFT compliance
initiatives; coordinate the MLØ & TF risk assessment
of the bank and review thereon; Page 37 of 138 present the compliance status with
recommendations before the MDØ
& CEO on half yearly basis; forward
STR/SAR and CTR to BFIU in time and in proper manner;Ø evaluate CTR to find out STR, SAR and if
suspicious transaction is detected thenØ
report it to BFIU report summary of self
assessment and independent testing procedure to BFIUØ in time and in proper manner; impart training, workshop, seminar related to
AMLØ & CFT for the
employees of the bank; make visit to
different branches to oversee the AML activitiesØ
take required measures to submit
information, report or documents in time.Ø
AMLD\ shall have following authorities: Appointment of BAMLCO and assign their
specific job responsibilities;ü
Requisition of human resources and
logistic supports for AMLD;ü
For any action on AMLü & CFT non-compliance,
HR Division shall consult with AMLD. 5.4.2 SEPARATION OF AMLD FROM INTERNAL
CONTROL & COMPLIANCE (ICC) AML department is separated from ICCD and formed
as a unique department to ensuring the independent audit function in the bank.
Either the division or department perform their job in different and
independent way. In this regard ICC also examines the performance of AMLD and
the bank‘s AML & CFT compliance program. Enough co-ordination and
co-operation in performing their responsibility and information exchange shall
have to be ensured. 5.5 CHIEF ANTI MONEY LAUNDERING COMPLIANCE OFFICER (CAMLCO)
High Official (DMD & above ) shall be designated as a Chief Anti Money
Laundering Compliance Officer (CAMLCO) at MBL‘s Head Office. At present Our
CAMLCO is an Additional Managing Director. He will have sufficient authority as
given by MD & CEO to implement and enforce corporate wide AML & CFT
policies, procedures and measures and he will report directly to MD&CEO.
The CAMLCO is responsible for oversight of the bank‘s compliance with the
regulatory requirements on systems and controls against money laundering and terrorist
financing. There will also be a Deputy Chief Anti Money Laundering Compliance
Officer (DCAMLCO) in the Head office of MBL. He will remain conversant with the
existing acts, rules and regulations, instructions issued by BFIU from time to
tine and international standards on preventing ML & TF. The CAMLCO, DC AM
LC O and the staff of AMLD and branch level AML & CFT compliance officers
all shall remain acquainted with all the staff members of the Bank. All
relevant staffs must be aware of the chain through which suspicious
transaction/activity reports must be passed to the CAMLCO. Page 38 of 138 5.5.1
AUTHORITIES AND RESPONSIBILITIES OF CAMLCO AuthoritiesCAMLCO shall exercise his
own authority in performing his duties. MD & CEO will issue an office order
conferring the authorities to CAMLCO; He
should not take any permission or consultation from/with the MDØ & CEO before
submission of STR/SAR and any document or information to BFIU; He shall maintain the confidentiality of
STR/SAR and any document orØ
information required by laws and instructions by BFIU; On AMLØ
& CFT issue none shall deny access to any information of the bank. If
anyone denies any access to him, HR Division shall take appropriate action. He shall ensure his/her continuing competence.Ø Responsibilities- To monitor, review and coordinate application
and enforcement of the Bank‘sØ
compliance policy including AML/CFT Compliance Policy. This will include –an
AML/CFT risk assessment, practices, procedures and controls for account
opening, KYC procedures and ongoing account/ transaction monitoring for
detecting suspicious transaction/ account activity , and a written AML/CFT
training plan; To monitor changes of
laws/regulations and directives of Bangladesh BankØ and revise its internal policies
accordingly; To respond to compliance
questions and concerns of the staff and adviseØ
regional offices/branches/units and assist in providing solutions to potential
issues involving compliance and risk; To
ensure that bank‘s AML/CFT policy is complete and up-to-date , toØ maintain ongoing
awareness of new and changing business activities and products and to identify
potential compliance issues that should be considered by the bank; To develop and maintain ongoing relationships
with regulatory authorities,Ø
external and internal auditors, regional/branch/unit heads and compliance
resources to assist in early identification of compliance issues; To assist in review of control procedures in
the bank to ensure legal andØ
regulatory compliance and in the development of adequate and sufficient testing
procedures to prevent and detect compliance lapses; To monitor the business through self-testing
for AML/CFT compliance andØ
take any required corrective action; To
oversee the submission of STR/SAR or any document or information toØ BFIU in time; To maintain the day-to-day operation of the
bank‘s AMLØ&CFT
compliance; CAMLCO shall be liable to MDØ & CEO or BoD for
proper functioning of AMLD and CCU; To
review and update MLØ
& TF risk assessment of the bank; To
ensure that corrective actions have taken by the bank to address theØ deficiency identified by
the BFIU or Bangladesh Bank. Page 39 of 138 5.6 BRANCH ANTI MONEY LAUNDERING
COMPLIANCE OFFICER (BAMLCO) Obligations under BFIU Circular-10, dated 28 Dec,
2014 For the implementation of all existing acts, rules, BFIU‘s instructions
and bank‘s own policies on preventing Money Laundering & Terrorist
Financing, bank shall nominate an experienced Branch Anti Money Laundering
Compliance Officer (BAMLCO) in every branch. As per instruction of AMLD, Head
Office, Head of Branch will nominated one BAMLCO in every Branch. In most cases
they will be Manager Operation or otherwise they will be high official
experienced in general banking. BAMLCOs shall remain updated on the existing
acts, rules and regulations, BFIU‘s instructions and bank‘s own policies on
preventing Money Laundering and Terrorist Financing. The job descriptions and
responsibilities of BAMLCO have been mentioned clearly in his/her appointment
letter. BAMLCO shall arrange AML & CFT meeting with other concerned
important officials of the branch quarterly and shall take effective measures
on the following matters after reviewing the compliance of the existing acts,
rules and regulations, BFIU‘s instructions on preventing Money Laundering &
Terrorist Financing: Know Your Customer,Ø Transaction monitoring,Ø Identifying and reporting of Suspicious
Transactions,Ø Record keeping,Ø
Training.Ø
5.6.1 AUTHORITIES AND RESPONSIBILITIES OF BAMLCO For preventing ML, TF & PF
in the branch, the BAMLCO must perform the following responsibilities: ensure that the KYC of all customers have done
properly and for the new customerØ
KYC is being done properly; ensure that
the UN Security Council and domestic sanction list checked properlyØ before opening of account
and while making any international transaction; keep information of ‗dormant accounts‘ and
take proper measures so that anyØ
withdrawal from these accounts shall not be allowed without compliance of
BFIU's instruction; ensure regular
transaction monitoring to find out any unusual transaction (In case ofØ an automated bank, the
bank should follow a triggering system against transaction profile or other
suitable threshold. In case of a traditional bank, transaction should be
examined at the end of day against transaction profile or other suitable
threshold. Records of all transaction monitoring should be kept in the file); review cash transaction to find out any
structuring;Ø review of CTR to find out STR/SAR;Ø ensure the checking of UN sanction list before
making any foreign transaction;Ø
ensure that all the employees of the
branch are well aware and capable to identify anyØ
unusual transaction or any attempt of unusual transaction; Page 40 of 138 compile self-assessment of the branch
regularly and arrange quarterly meetingØ
regularly; accumulate the training
records of branch officials and take initiatives includingØ reporting to CCU, HR and
training academy; ensure all the
required information and document are submitted properly to CCU andØ any freeze order or stop
payment order are implemented properly; follow the media report on terrorism,
terrorist financing or other offences, likeØ
corruption, bribery, drug trafficking, gold smuggling, human trafficking,
kidnapping or other predicate offences and find out any relationship of the
branch with the involved person; if so the BAMLCO should make an STR/SAR; ensure that the branch is maintaining AMLØ & CFT files properly
and record keeping is done as per the requirements of chapter 7; ensure that corrective actions have taken by
the branch to address the deficiencyØ
identified by the BFIU or BB. 5.7 INTERNAL CONTROL AND COMPLIANCE Obligations
under BFIU Circular-10, dated 28 Dec, 2014 With a goal of establishing an
effective AML and CFT regime, it shall have to be ensured that the Internal
Audit Department of the bank is equipped with enough manpower who have enough
knowledge on the existing acts, rules and regulations, BFIU‘s instructions on
preventing money laundering & terrorist financing and bank‘s own policies
in this matter to review the Self Assessment Report received from the branches
and to execute the Independent Testing Procedure appropriately. The Internal Control
and Compliance Division (ICCD) of MBL have an important role for ensuring
proper implementation of bank's AML & CFT Compliance Program. Our ICCD
shall remain equipped with enough manpower and autonomy to look after the
prevention of ML & TF. The ICCD has to oversee the implementation of the
AML & CFT compliance program of the bank and has to review the 'Self
Assessment Report' received from the branches and to execute the 'Independent
Testing Procedure' appropriately. The inspection team of ICCD performs the
following issues for preventing ML & TF while inspecting the Branch : understand MLØ
& TF risk of the bank and check the adequacy of the mitigating measures; examine the overall integrity and
effectiveness of the AML/CFT ComplianceØ
Program; examine the adequacy of
Customer Due Diligence (CDD) policies, proceduresØ
and processes, and whether they comply with internal requirements; determine personnel adherence to the bank‘s
AMLØ&CFT Compliance
Program; perform appropriate transaction
testing with particular emphasis on high riskØ
operations (products, service, customers and geographic locations); assess the adequacy of the bank‘s processes
for identifying and reportingØ
suspicious activity; Page 41 of 138 where an automated system is not used to
identify or aggregate large transactions,Ø
the audit should include a sample test check of tellers‘ cash proof sheets; communicate the findings to the board and/or
senior management in a timelyØ
manner; recommend corrective action to
address the identified deficiencies;Ø
track previously identified deficiencies
and ensures correction made by theØ
concerned person; examine that
corrective actions have taken on deficiency identified by the BFIUØ or BB; assess training adequacy, including its
comprehensiveness, accuracy of materials,Ø
training schedule and attendance tracking; determine when assessing the training program
and materials:Ø the importance of the board and the senior
management place on ongoing·
education, training and compliance, employee
accountability for ensuring AML·&CFT
compliance, comprehensiveness of
training, in view of specific risks of individual·
business lines, training of personnel
from all applicable areas of the bank,·
frequency of training,· coverage of bank policies, procedures,
processes and new rules and·
regulations, coverage of different forms
of money laundering and terrorist financing as·
they relate to identifying suspicious activity, penalties for noncompliance and regulatory
requirements.· 5.8
EXTERNAL AUDITOR External auditor of MBL shall play an important role in
reviewing the adequacy of AML & CFT controls by communicating their
findings and recommendations to management via the annual management letter,
which accompanies the audit report. External auditor would be risk-focus while
developing their audit programs and conducts intensive reviews of higher risk
areas where controls may be deficient. External auditors will report incidences
of suspected criminal activity uncovered during audits in its audit report.
Page 42 of 138 CUSTOMER DUE DILIGENCE 6.1 INTRODUCTION Customer Due Diligence
(CDD) combines the Know Your Customer (KYC) procedure, transaction monitoring
based on the information and data or documents collected from reliable and
independent sources. The CDD obligations on bank under legislation and
regulation are designed to make it more difficult to abuse the banking industry
for money laundering or terrorist financing. The CDD obligations compel bank to
understand who their customers are to guard against the risk of committing
offences under MLPA, 2012 including 'Predicate Offences' and the relevant
offences under ATA, 2009. Mercantile Bank is always committed to ensure
adequate CDD measures considering the risks of money laundering and terrorist financing.
Such risk sensitive CDD measures would be based ona) Type of customers; b)
Business relationship with the customer; c) Type of banking products; and d)
Transaction carried out by the customer. The adoption of effective KYC
standards is an essential part of banks' risk management policies. To mitigate
significant risks especially legal and reputational risk Branch will remain
careful in ensuring adequate KYC program. Sound KYC Policies and Procedures not
only contribute to the bank's overall safety and soundness, they also protect
the integrity of the banking system by reducing money laundering, terrorist
financing and other unlawful activities. Branch therefore need to carry out
customer due diligence for two broad reasons: to help the organization, at the time due
diligence is carried out, to beØ
reasonably satisfied to those customers who they say about, to know whether
they are acting on behalf of another, and that there is no legal barrier (e.g.
government or international sanctions) to provide them with the product or
service requested; and to enable the
organization in investigation, law enforcement by providingØ available information
about customers in due process. It will be appropriate for our bank to know
more about the customer by being aware of the nature of the customer‘s business
in order to assess the extent to which his transactions and activity undertaken
with or through the bank is consistent with that business. Page 43 of 138 6.2
LEGAL OBLIGATIONS OF CDD Obligations under MLPA, 2012 The reporting
organizations shall have to maintain complete and correct information with
regard to the identity of its customers during the operation of their accounts
and provide with the information maintained under the clause to Bangladesh
Bank. Obligations under MLP Rules, 2013 The bank shall identify the customer
(whether permanent or occasional, and whether natural or legal person or legal
arrangement) and verify that customer‘s identity using reliable, independent
source documents, data or information (identification data). The verification
of identity of a customer or a beneficial owner should include a series of
independent checks and inquiries and not rely only on documents provided by the
customer or beneficial owner. The bank shall verify that any person purporting
to act on behalf of the customer is so authorized, and identify and verify the
identity of that person. The bank shall identify the beneficial owner and take
reasonable measures to verify the identity of the beneficial owner, using the
relevant information or data obtained from a reliable source, such that the
bank is satisfied that it knows who the beneficial owner is. The bank shall
understand and, as appropriate, obtain information on, the purpose and intended
nature of the business relationship. The bank shall also conduct ongoing due
diligence on the business relationship. The bank shall scrutinize the
transactions undertaken by a customer throughout the relationship with the
customer to ensure that the transactions are consistent with the nature,
business and risk profile of the customer, including where necessary, with the
source of funds. Obligations under BFIU Circular No- 10, dated 28 December,
2014 A detail provisions of CDD measures discussed in paragraph no. 3 and 5.
Page 44 of 138 6.3 GENERAL RULE OF CDD Completeness and Accuracy Our Bank
always needs to be certain about the customer‘s identity and underlying purpose
of establishing relationship with the bank, and should collect sufficient
information up to satisfaction. ―Satisfaction of the Bank Officials‖ means
satisfaction of the appropriate authority that is necessary due diligence has
been conducted considering the risks of the customers in the light of existing
directions MBL has an obligation to maintain complete and accurate information
of our customer and person acting on behalf of a customer. ‗Complete‘ refers to
combination of all information for verifying the identity of the person or
entity. For example: name and detail address of the person, profession, source of
funds, Passport/National Identity Card/Birth Registration
Certificate/acceptable ID card with photo, phone/ mobile number etc. ‗Accurate‘
refers to such complete information that has been verified for accuracy. KYC
procedures refers knowing a customer physically and financially. This means to
conduct an effective KYC, it is essential to accumulate complete and accurate
information about the prospective customer. Where Branches are unable to
identify the customer and verify that customer‘s identity using reliable,
independent source documents, data or information, unable to identify the
beneficial owner taking reasonable measures, unable to obtain information on
the purpose and intended nature of the business relationship, branch should not
open the account, commence business relations or perform the transaction; or
should terminate the business relationship; and should consider making a
suspicious transactions report in relation to the customer Today Identification
Reference: e-TIN/National ID/Passport/Driving License is the main key record
for KYC compliance. Identification information electronically and validation of
the customer‘s identity , can then be conducted automatically from Core Banking
System by using any type web service. It will help us to identity the proper
person identity and reduce the work load. Now in Bangladesh Govt. Organization
& Financial Institution can verify the NID data through ―Election
Commission Bangladesh‖ Data Warehouse. Two ways they are providing this
service: 1) Web Portal Service 2) Web Service ( which can be use as a API) CDD
measures (Review and update) Branch should take necessary measures to review
and update the KYC of the customer after a certain interval. This procedure
shall have to be conducted in every two years in case of low risk customers.
Furthermore, this procedure shall have to be conducted in every year in case of
high risk customers. But, Branch should update the changes in any information
on the KYC as soon as bank gets to be informed. Moreover, Branch should update
KYC information anytime if there is any particular necessity realized.
Depending on the updated information, the risks associated with these accounts
shall have to be assessed again without any delay. Page 45 of 138 Any
subsequent change to the customer‘s name, address, or employment details of
which the Branch becomes aware should be recorded as part of the CDD process.
Generally this would be undertaken as part of good business practice and due
diligence but also serves for prevention of money laundering and terrorist
financing. Branch should collect the announcement of customer about the
Transaction Profile of customer account in the specified form. After reviewing
the nature of the customer, the source of money in the account and the nature of
transaction, bank should again collect the Transaction Profile along with the
amendments in it from the customer by reviewing the transactions of the
customer within 6 (six) months of establishing business relation and assessing
the effectiveness with a logical consideration. Enhanced CDD measures Branch
should conduct Enhanced CDD measures, when necessary, in addition to normal CDD
measures. Branch should conduct Enhanced Due Diligence (EDD) under the
following circumstances: Individuals or
legal entities scored with high risk;§
Individuals who are identified as
politically exposed persons (peps),§
influential persons and chief executives or top level officials of any
international organization; Transactions
identified with unusual in regards to its pattern, volume§ and complexity which have no apparent economic
or lawful purposes; While establishing
and maintaining business relationship and§ conducting transaction with a person
(including legal representative, financial institution or any other
institution) of the countries and territories that do not meet international
standard in combating money laundering and terrorism financing (such as the
countries and territories enlisted as High–Risk and Non- Cooperative Jurisdictions
in the Financial Action Task Force‘s Public Statement). Enhanced CDD measures
includes : Obtaining additional
information on the customer (occupation, volume ofØ assets, information available
through public databases, internet, etc) and updating more regularly the
identification data of customer and beneficial owner. Obtaining additional information on the
intended nature of the businessØ
relationship. Obtaining information on
the source of funds or source of wealth of theØ
customer. Obtaining information on the
reasons for intended or performed transactions.Ø
Obtaining the approval of senior
management to commence or continue theØ
business relationship when applicable. Page 46 of 138 Conducting regular monitoring of the business
relationship, by increasing theØ
number and timing of controls applied and selecting patterns of transactions
that need further examination. Making
aware the concerned bank officials about the risk level of theØ customer. 6.4 TIMING OF
CDD Branch must apply CDD measures when it does any of the following: a)
establishing a business relationship; b) carrying out an occasional
transaction; c) suspecting money laundering or terrorist financing; or d)
Suspecting t h e veracity of documents, data or information previously obtained
for the purpose of identification or verification. 6.5 TRANSACTION MONITORING
Branch is monitoring the customer‘s transaction on a regular basis. The complex
transaction, transactions with deviation from normal transaction and the
transactions that does not have reasonable purpose or the transaction with
unusual pattern shall have to be more emphasized during monitoring. MBL has
already developed a software based transaction monitoring system ( MBL goAML
Interface & Velocity AML Solution) where the branches /divisions of Head
Office can monitor the transaction in various ways that includes but not
limited to the followings: Transactions
in local currency;· Transactions in foreign currency;· Transactions above the designated threshold
determined by the branch;·
Cash transactions under CTR threshold to
find out structuring;·
Transactions related with international
trade;· Transaction screening with local and UN
Sanction list.· 6.6
EXCEPTION WHEN OPENING A BANK ACCOUNT The verification of the documents of
account holder may take place after the account has been opened, provided that
there are adequate safeguards in place to ensure that, before verification has
been completed: a) The account is not closed; b) Transaction is not carried out
by or on behalf of the account holder (Including any payment from the account
to the account holder). 6.7 IN CASE WHERE CONDUCTING THE CDD MEASURE IS NOT
POSSIBLE If conducting the CDD measure becomes impossible because of the non
cooperating behavior of the customer or if the collected information seemed to
be unreliable, that is, Branch could not collect satisfactory information on
customer identification and could Page 47 of 138 not verify that, Branch should
take the following measures: (a) Must not carry out a transaction with or for
the customer through a bank account; (b) Must not establish a business
relationship or carry out an occasional transaction with the customer; (c) Must
terminate any existing business relationship with the customer; (d) Must consider
whether it ought to be making a report to the BFIU through an STR. Branch must
always consider whether an inability to apply CDD measures is caused by the
customer. In this case, branch will consider whether there are any other ways
of being reasonably satisfied as to the customer‘s identity. In either case,
branch should consider whether there are any circumstances which give grounds
for making a report to BFIU. 6.8 CUSOMER IDENTIFICATION: Customer
identification is an essential part of CDD measures. For the purposes of this
Guidance Notes, a customer includes: the
person or entity that maintains an account with the bank or those on whose§ behalf an account is
maintained (i.e. beneficial owners); the
beneficiaries of transactions conducted by professional intermediaries; and§ any person or entity connected with a
financial transaction who can pose a§
significant reputational or other risk to the bank. Whenever the opening of an
account or business relationship is being considered, or a one-off transaction
or series of linked transactions of BDT 5,000 or more is to be undertaken,
identification procedures must be followed. Identity must also be verified in
all cases where money laundering is known, or suspected. Once verification of
identity has been satisfactorily completed, no further evidence is needed to
undertake subsequent transactions. However, information should be updated or
reviewed as appropriate and records must be maintained. WHAT CONSTITUTES A
CUSTOMER‟S IDENTITY? Identity generally means a set of attributes which
uniquely define a natural or legal person. There are two main constituents of a
person's identity, remembering that a person may be any one of a range of legal
persons (an individual, corporate body, partnership, etc), For the purposes of
this guidance, the two elements are: the
physical identity (e.g. Birth Certificate, TIN/VAT Registration, Passport/· National ID, Driving
License etc.); and the activity
undertaken.· Page
48 of 138 Confirmation of a person's address is also useful in determining
whether a customer is residing. If the customer is a resident of a high-risk
country/territory, branch shall perform EDD. Knowledge of both residence and
nationality may also be necessary, in a non money-laundering context, to avoid
breaches of UN or other international sanctions to which Bangladesh is a party.
Where a passport is taken as evidence, the number, date and place of issuance
should be recorded from the valid passport. The other main element in a
person's identity is sufficient information about the nature of the Business
that the customer expects to undertake, and any expected or predictable,
pattern of transactions, For some business these may be obvious, however, for
more complex businesses this may not be the case. The extent of the description
required will depend on the institution‘s own understanding of the applicant's
business. Once account relationship has been established, reasonable steps
should be taken by the institution to ensure that descriptive information is
kept up-to-date as opportunities arise. lt is important to emphasize that the
customer identification process does not end at the point of application, The
need to confirm and update information about identity, such as changes of
address, and the extent of additional KYC information to be collected over time
will differ from sector to sector and between institutions within any sector.
It will also depend on the nature of the product or service being offered, and
whether personal contact is maintained enabling file notes of discussion to be
made or whether all contact with the customer is remote. While opening account
or establishing other relationship with the customer, Branch must obtain
information, documents, verifying the address & source of fund as per Annexure-B.
Record Keeping: All documents collected or gathered for establishing
relationship must be filed in with supporting evidence. Where this is not
possible, the relevant details should be recorded on the applicant's file. Bank
which regularly conduct one-off transactions, should record the details in a
manner which allows cross reference to transaction records. Introducer: To
identify the customer and to verify his/her identity, an introducer may play
important role. An introduction from a respected customer, personally known to
the management, or from a trusted member of staff, may assist the verification
procedure but does not replace the need for verification of address as set out
above. Details of the introduction must be recorded on the customer's file.
However, personal introductions without full verification should not become the
norm, and directors/senior managers must not require or request staff to breach
account opening procedures as a favor to an applicant. Where such procedures
would not be relevant, or do not provide satisfactory evidence of identity,
verification might be obtained in the form of the home address of parent(s).
Under normal circumstances, a family member or guardian who has an existing
relationship with the institution concerned would introduce a minor. In cases
where the person opening the account is not already known, the identity of that
person, and any other person who will have control of the account, shall be
verified. Page 49 of 138 Powers of Attorney/ Mandates to operate Accounts: The
authority to deal with assets under a power of attorney constitutes a business
relationship and therefore, where appropriate, it may be advisable to establish
the identities of holders of powers of attorney, the grantor of the power of
attorney and third party mandates. Records of all transactions undertaken in
accordance with a power of attorney shall be kept. On the other hand, valid
reasons to execute mandate under the law for operating the accounts shall
exist. Timing and Duration of Verification: The best time to undertake
verification is prior to entry into the account relationship. Verification of
identity must be completed before any transaction is completed in account.
However, if it is necessary for sound business reasons to open an account or
carry out a significant one-off transaction before verification can be
completed, this should be subject to stringent controls which should ensure
that any funds received are not passed to third parties. Alternatively, a
senior member of staff may give appropriate authority, This authority shall not
be delegated, and shall only be done in exceptional circumstances. Any such
decision shall be recorded in writing. Verification, once begun, should
normally be pursued either to a satisfactory conclusion or to the point of
refusal. If a prospective customer does not pursue an application, staff may
(or may not) consider that this is itself suspicious. CARDS/INTERNET
BANKING/MOBILE BANKING: The KYC procedures is invariably be applied to new
technologies including ‗Mercantile Bank‖ Debit Card/Credit Card ' products
/internet Banking/Mobile Banking facility or such other product which may be
introduced by the Bank in future that might favor anonymity, and take measures,
if needed to prevent their use in money laundering schemes. Branches shall
ensure that appropriate KYC procedures are duly applied before issuing the
cards to the customers. It is also desirable that if at any point of time Bank
appoints/engages agents for marketing of these cards / products are also
subjected to KYC measures KNOW YOUR CUSTOMER‟S CUSTOMER: Enhance due diligence
is required to be in practice to know your customer‘s customer ensuring the
highest level of compliance in AML & CFT issues. KYC‘C has become the most
important tool for identification /verification of the customer‘s business, It
is essential to find out the customer‘s customer to whom they are dealing with.
On the other hand, Customers close association or family members or beneficiary
of the account shall be known in to. Branch shall- 1. Take a list with the true
identification like name, address, type of business, etc. of customer‘s
customer 2. Review the given list and check the background of the customer‘s
customer at least half yearly basis if necessary; 3. Monitor the transaction
occurred by the customer‘s customer; 4. Monitor the customer‘s customer
business indirectly. Page 50 of 138 MBL reserves the right to close any
account, which in its opinion has contravened the laws of the country, and
indicated a reasonable degree of suspicious to be involved in illegitimate
business. 6.9 VERIFICATION OF SOURCE OF FUNDS Branch shall collect and verify
the document supporting source of fund of the person at the time of
establishing any business relationship or while conducting CDD. The document
could include present employment identity, salary certificate/copy/advice,
pension book, financial statement, income tax return, business document or any
other document that could satisfy the bank. Branch shall request the person to
produce E-TIN (Electronic Tax Identification No) certificate which declares
taxable income. 6.10 VERIFICATION OF ADDRESS Branch shall verify the address of
the person at the time of establishing any business relationship or while
conducting CDD. This could be done through the physical verification by the
bank or by standard mail or courier service correspondence. Branch could
collect any other document (recent utility bill mentioning the name and address
of the customer) as per their satisfaction. Verification of the information
obtained must be based on reliable and independent sources – which might either
be a document or documents produced by the customer, or electronically by the
bank, or by a combination of both. Where business is conducted face-to-face, bank
should see originals of any documents involved in the verification. 6.11
PERSONS WITHOUT STANDARD IDENTIFICATION DOCUMENTATION Most people need to make
use of the financial system at some point in their lives. It is important,
therefore, that the socially or financially disadvantaged such as the elderly,
the disabled, students and minors should not be precluded from obtaining
financial services just because they do not possess evidence of identity or
address where they cannot reasonably be expected to do so. In these
circumstances, a common sense approach and some flexibility without
compromising sufficiently rigorous anti-money laundering procedures is
recommended. Internal procedures must allow for this, and must provide
appropriate advice to the concerned officer on how identity can be confirmed in
these exceptional circumstances. The important point is that a person's
identity can be verified from an original or certified copy of another
document, preferably one with a photograph. A certifier must be a suitable person, such as
for instance a lawyer, accountant,Ø
director or manager of a regulated institution, a notary public, a member of
the judiciary or a senior civil servant. The certifier should sign the copy
document (printing his name clearly underneath) and clearly indicate his
position or capacity on it together with a contact address and phone number.
Page 51 of 138 In these cases it may be
possible for the concerned officer to accept confirmationØ from a professional (e.g.
doctor, lawyer, directors or managers of a regulated institution, etc) who
knows the person. Where the individual lives in accommodation for which he or
she is not financially responsible, or for which there would not be documentary
evidence of his/her address, it may be acceptable to accept a letter from the
guardian or a similar professional as confirmation of a person‘s address. A
Head of Branch may authorize the opening of a business relationship if s/he is
satisfied with confirmation of identity circumstances but must record his/her
authorization on the customer‘s file, and must also retain this information in
the same manner and for the same period of time as other identification
records. For students or other young
people, the normal identification procedures set outØ above should be followed as far
as possible. Where such procedures would not be relevant, or do not provide
satisfactory evidence of identity, verification might be obtained in the form
of the home address of parent(s), or by making enquiries of the applicant‘s
educational institution. Under normal
circumstances, a family member or guardian who has an existingØ relationship with the
Bank concerned would introduce a minor. In cases where the person opening the
account is not already known, the identity of that person, and any other person
who will have control of the account, should be verified. 6.12 WALK-IN/ ONE
OFF/ONLINE CUSTOMERS Branch shall collect complete and correct information
while serving Walk-in customer, i.e. a customer without having account. Branch
shall know the sources of fund and motive of transaction while issuing DD/PO or
serving for TT/MT. Branch shall collect complete and correct information of any
person other than customer deposit or withdrawal using on-line facilities.
Additionally, in regards to on-line deposit MBL shall identify sources of funds
as well. Branch shall obtain all information of Walk-In/One Off/ Online
customer as per Annexure-D 6.13 NON FACE TO FACE CUSTOMERS Non face to face
customer means ―the customer who opens and operates his account by agent of the
bank or by his own professional representative without having physical presence
at the bank branch. Where there is no face-to-face contact, Branch shall not
allow in establishing relationship with non-face to face customer. 6.14
CUSTOMER UNIQUE IDENTIFICATION CODE Branch shall use unique identification code
for any customer maintaining more than one accounts or availing more than one
facilities. Such unique identification system could facilitate branch to avoid
redundancy, and saves time and resources. This mechanism also enables branch to
monitor customer transactions effectively. Page 52 of 138 6.15 CORRESPONDING
BANKING ‗Cross Border Correspondent banking‘ shall refer to ―providing banking
services to another bank (respondent) by a bank (correspondent). These kinds of
banking services shall refer to credit, deposit, collection, clearing, payment,
and cash management, international wire transfer, drawing arrangement for
demand draft or other similar services‖. Mercantile Bank would establish Cross
Border Correspondent Banking relationship after being satisfied about the
nature of the business of the correspondent or the respondent bank through
collection of information as per BFIU circular-10 dated 28 December, 2014. MBL must
also obtain approval from its Senior Management before establishing and
continuing any correspondent relationship. MBL must be sure about the effective
supervision of that foreign bank by the relevant regulatory authority. MBL
shall not establish or maintain any correspondent relationship with any shell
bank and not to establish or maintain any relationship with those correspondent
or respondent banks that establish correspondent banking relationship or
maintain accounts with or provide services to a shell bank. MBL shall pay
particular attention or conduct Enhanced Due Diligence while establishing or
maintaining a correspondent banking relationship with banks incorporated in a
jurisdiction that do not meet or have significant deficiencies in complying international
standards for the prevention of money laundering and terrorist financing (such
as the countries and territories enlisted in High –Risk and Non- Cooperative
Jurisdictions in the Financial Action Task Force‘s Public Statement). Detailed
information on the beneficial ownership of such banks and extensive information
about their policies and procedures on preventing money laundering and
terrorist financing shall have to be obtained. AS a corresponding bank, MBL
must be sure about the appropriate CDD of the customer, if any respondent bank
allow direct transactions by their customers to transact business on their
behalf (i.e. payable through account). Moreover, MBL will collect the
information on CDD of the respective customer from the respondent bank. Here,
‗Payable through accounts‟ refers to “Corresponding accounts that are used
directly by third parties to transact business on their behalf.” 6.16
POLITICALLY EXPOSED PERSONS (PEPs), INFLUENTIAL PERSONS AND CHIEF EXECUTIVES OR
TOP LEVEL OFFICIALS OF ANY INTERNATIONAL ORGANIZATION All Clients must be
subject to an assessment to determine whether they are PEP‘s or Influential
Persons or chief executives or top level officials of any international
organization and their linked entities. These customers pose a higher risk of
money laundering, bribery, corruption and reputational risk to the bank due to
their current or former position of political power or influence, which makes
them more vulnerable to corruption. Page 53 of 138 6.16.1 DEFINITION OF PEPs
Politically Exposed Persons (PEPs) refer to ―Individuals who are or have been
entrusted with prominent public functions by a foreign country, for example
Heads of State or of government, senior politicians, senior government,
judicial or military officials, senior executives of state owned corporations,
important political party officials.‖ The following individuals of other
foreign countries must always be classed as PEPs: i. heads and deputy heads of
state or government; ii. senior members of ruling party; iii. ministers, deputy
ministers and assistant ministers; iv.members of parliament and/or national
legislatures; v. members of the governing bodies of major political parties;
vi.members of supreme courts, constitutional courts or other high-level judicial
bodies whose decisions are not subject to further appeal, except in exceptional
circumstances; vii. heads of the armed forces, other high ranking members of
the armed forces and heads of the intelligence services; viii. heads of
state-owned enterprises. 6.16.2 CDD MEASURES FOR PEP‘S Before opening a PEP‘s
Account Branch should perform the following CDD measures : a) Branch has to
adopt the Risk Based Approach to determine whether a customer or the real
beneficial owner of an account is a PEP; b) obtain senior managements‘ approval
before establishing such business relationship; c) take reasonable measures to
establish the source of fund of a PEP‘s account; d) monitor their transactions
in a regular basis; and e) all provisions of Foreign Exchange Regulation Act,
1947 and issued rules and regulations by Bangladesh Bank under this act have to
be complied accordingly . 6.16.3 DEFINITION OF INFLUENTIAL PERSONS(IPs)
‗Influential persons‘ refers to, ―Individuals who are or have been entrusted
with prominent public functions, for example Heads of State or of government,
senior politicians, senior government, judicial or military officials, senior
executives of state owned corporations, important political party officials.‖
The following individuals must always be classed as Influential persons: a)
heads and deputy heads of state or government; b) senior members of ruling
party; c) ministers, state ministers and deputy ministers; d) members of
parliament and/or national legislatures; e) members of the governing bodies of
major political parties; f) Secretary, Additional secretary, joint secretary in
the ministries; Page 54 of 138 g) Judges of supreme courts, constitutional
courts or other high-level judicial bodies whose decisions are not subject to
further appeal, except in exceptional circumstances; h) governors, deputy
governors, executive directors and general managers of central bank; i) heads
of the armed forces, other high ranking members of the armed forces and heads
of the intelligence services; j) heads of state-owned enterprises; k) members
of the governing bodies of local political parties; l) ambassadors, chargés
d‘affaires or other senior diplomats; m) city mayors or heads of municipalities
who exercise genuine political or economic power; n) board members of
state-owned enterprises of national political or economic importance. 6.16.4
CDD MEASURES FOR INFLUENTIAL PERSONS (IP) Before opening a IP‘s Account Branch
should perform the following CDD measures : a) Branch have to adopt the Risk
Based Approach to determine whether a customer or the real beneficial owner of
an account is an IP; b) obtain senior managements‘ approval before establishing
such business relationship; c) take reasonable measures to establish the source
of fund of a IP‘s account; d) monitor their transactions in a regular basis;
and e) all provisions of Foreign Exchange Regulation Act, 1947 and issued rules
and regulations by Bangladesh Bank under this act have to be complied
accordingly .. 6.16.5 DEFINITION OF CHIEF EXECUTIVES OR TOP LEVEL O F F I C I A
L S OF ANY INTERNATIONAL ORGANIZATION „Chief executive of any international
organization or any top level official‟ refers to, ―Persons who are or have
been entrusted with a prominent function by an international organization
refers to members of senior management, i.e. directors, deputy directors and
members of the boards or equivalent functions.‖ The heads of international
organizations and agencies that exercise genuine political or economic
influence (e.g. the United Nations, the International Monetary Fund, the World
Bank, the World Trade Organization, the International Labor Organization) must
always be classed as this category. 6.16.6 CDD MEASURES FOR CHIEF EXECUTIVES OR
TOP LEVEL OFFICIALS OF ANY INTERNATIONAL ORGANIZATION Before opening a Account
of CEO or top level officials of any international organization, Branch should
perform the following CDD measures: a) Branch have to adopt the Risk Based
Approach to determine whether a customer or the real beneficial owner of an
account is a CEO or top level officials of any international organization; b)
obtain senior managements‘ approval before establishing such business
relationship; Page 55 of 138 c) take reasonable measures to establish the
source of fund of the account of a CEO or top level officials of any
international organization; d) monitor their transactions in a regular basis;
and e) all provisions of Foreign Exchange Regulation Act, 1947 and issued rules
and regulations by Bangladesh Bank under this act have to be complied accordingly
. 6.16.7 CLOSE FAMILY MEMBERS AND CLOSE ASSOCIATES OF PEPS, INFLUENTIAL PERSONS
AND CHIEF EXECUTIVES OR TOP LEVEL OFFICIALS OF ANY INTERNATIONAL ORGANIZATION
In addition, close family members and close associates of these categories will
also be classified as the same category. Close Family Members include: a) the
PEP‘s/influential persons/chief executive of any international organization or
any top level official‘s spouse (or any person considered as equivalent to the
spouse); b) the PEP‘s/influential persons/chief executive of any international
organization or any top level official‘s children and their spouses (or persons
considered as equivalent to the spouses); and c) the PEP‘s/influential
persons/chief executive of any international organization or any top level
official‘s parents; There may be exceptional circumstances where the individual
should not be classified as a ‗Close Family Member‘ of the PEP, such as
estrangement, divorce etc. In such cases, the circumstances must be thoroughly
investigated, examined and caution exercised. In addition, where other family
members such as the siblings, cousins, relatives by marriage of the PEP are
deemed, by virtue of the nature of the relationship, to have a close
relationship with the PEP, they should also be classified as PEPs. A Close
Associate of a PEP/Influential Person/Chief executive of any international
organization or any top level official includes: a) an individual who is known
to have joint beneficial ownership or control of legal entities or legal
arrangements, or any other close business relations with the PEP; and b) an
individual who has sole beneficial ownership or control of a legal entity or
legal arrangement which is known to have been set up for the benefit of the
PEP. In addition, it should include any person publicly or widely known to be a
close business colleague of the PEP, including personal advisors, consultants,
lawyers, accountants, colleagues or the PEP‘s fellow shareholders and any
person(s) that could potentially benefit significantly from close business
associations with the PEP. 6.16.8 CDD MEASURES FOR CLOSE FAMILY MEMBERS AND
CLOSE ASSOCIATES OF PEPS, INFLUENTIAL PERSONS AND CHIEF EXECUTIVES OR TOP LEVEL
OFFICIALS OF ANY INTERNATIONAL ORGANIZATION Bank will identify if any of its
customer is a family member or close associates of a PEP, IP or CEO or top
level officials of any international organization. Once identified banks need
to apply enhanced CDD measures that is set out in 6.3 of this guidelines.
Moreover, Page 56 of 138 they need to perform the followinga) MBL will adopt
the Risk Based Approach to determine whether a customer or the real beneficial
owner of an account is a family member or close associates of a PEP, IP or CEO
or top level officials of any international organization; b) obtain senior
managements‘ approval before establishing such business relationship; c) take
reasonable measures to establish the source of fund of the account of a family
member or close associates of a PEP, IP or CEO or top level officials of any
international organization; d) monitor their transactions in a regular basis;
and e) all provisions of Foreign Exchange Regulation Act, 1947 and issued rules
and regulations by Bangladesh Bank under this act have to be complied
accordingly 6.17 WIRE TRANSFER ―Wire transfer‖ refers to such financial
transactions that are carried out on behalf of an originator (person or
institution) through a financial institution by electronic means with a view to
making an amount of funds available to a beneficiary person at a beneficiary
financial institution. 6.17.1 CROSS-BORDER WIRE TRANSFERS In case of threshold
cross-border wire transfers of 1000 (one thousand) or above USD or equivalent
foreign currency, branch will collect full and accurate information of the
originator and the same information will have to send to
intermediary/beneficiary bank. Furthermore, for cross-border wire transfers,
below the threshold branch will preserve the full and meaningful originator
information. For providing money of cross-border wire transfers to beneficiary,
full and meaningful beneficiary information has to be preserved by the branch.
Where several individual cross-border wire transfers from a single originator
are bundled in a batch file for transmission to beneficiaries, the batch file
has to contain required and accurate originator information, and full
beneficiary information. In addition, bank should include the account number of
the originator. 6.17.2 DOMESTIC WIRE TRANSFERS In case of threshold domestic
wire transfers of at least 25000/- (twenty five thousands) BDT, branch will
collect, preserve the full and accurate information of the originator and the
information will have to send to intermediary / beneficiary bank /
institutions. Furthermore, for domestic wire transfers below the threshold b r
a n c h w i l l p r e s e r v e t h e full and meaningful originator
information. For providing money of domestic wire transfers to beneficiary, b r
a n c h w i l l p r e s e r v e t h e full and meaningful beneficiary information.
Mobile financial services providing MBL should use KYC format provided time to
time by Payment System Department, Bangladesh Bank, in addition to aforesaid
instructions. In case of wire transfer by using debit or credit card (except
buying goods and services), similar information as above has to be preserved in
the payment related message/instructions. Page 57 of 138 6.17.3 DUTIES OF
ORDERING, INTERMEDIARY AND BENEFICIARY BANK IN CASE OF WIRE TRANSFER Ordering
Bank: As an ordering bank, MBL shall ensure that qualifying wire transfers
contain required and accurate originator information, and required beneficiary
information. These information has to be preserved minimum for 5 (five) years.
Intermediary Bank: For cross-border and domestic wire transfers, MBL working as
an intermediary between ordering bank and beneficiary bank shall ensure that
all originator and beneficiary information that accompanies a wire transfer is
retained. MBL shall keep the record for at least five years. As an intermediary
bank, MBL shall have effective risk-based policies and procedures for
determining reasonable measures to identify wire transfers that lack required
originator information or required beneficiary information such as execution,
rejection, or suspension of that wire transfer and the appropriate follow-up
action. Such measures should be consistent with straight-through processing.
Beneficiary Bank: As a beneficiary bank, MBL shall set off risk based procedure
to identify wire transfers that lack required originator or required
beneficiary information. In case of insufficient originator information MBL
shall collect those information through mutual communication or using any other
means. During the payment to receiver/beneficiary, MBL shall collect full and
accurate information of receiver/beneficiary and shall preserve those
information for 5 (five) years. 6.18 CDD FOR BENEFICIAL OWNERS B r a n c h
shall apply CDD obligations for the beneficial owners of the accounts before or
during the course of establishing a business relationship or conducting
occasional transactions. In doing so, Branch should put in place appropriate
measures to indentify beneficial owner. Branch, upon its own satisfaction
ensure CDD of beneficial ownership by collecting information and documents from
independent and reliable sources that includes publicly available information,
information from customer or information from other reliable sources. Branch
shall consider following aspects while identifying beneficial ownership
includes: Any natural person operating
accounts on behalf of customer;Ø
Any personØ
(whether acting alone or together) who has controlling interest or ownership
interest on a customer who might be legal entity or legal arrangements. Where
there is any doubt identifying controlling interest, the banks should consider
other means to determine controlling interest or ownership of a legal entity or
arrangements. In addition to that bank should also consider reasonable measures
to verify the identity of the relevant natural person who hold senior
management position; Any person or
entity who has controlling or 20% or above share holding within anyØ or legal entity. The settler(s), trustee(s), the protector, the
beneficiaries or class of beneficiaries, orØ
Page 58 of 138 any other natural person who exercises control over the trust. Any person in equivalent or similar position
for trust (as mentioned above)shouldØ
consider for other types of legal arrangements. Where, a natural or legal
persons who holds controlling interest, listed on a stock exchange and subjects
to disclosure requirements or majority owned subsidiaries of such listed
companies may exempted from identifying or verifying beneficial ownership
requirements. 6.19 RELIANCE ON THIRD PARTY Branch could rely on the third
parties to perform the CDD measures with the prior permission of Bangladesh
Bank which may includes i) identify and verify customer identity; ii) identify
the beneficial ownership and control structure; and iii) identify the purpose
and nature of the business relationship under the following criteria: A third party should immediately obtain
necessary information related to i) -iii)Ø
as mentioned above; All necessary data
and documents held with the third party must beØ
available for the banks without any delay; Branch should satisfy that third party is
regulated, supervised and monitoredØ
for, and has taken appropriate measures in compliance with CDD and record
keeping requirements set out in this Guidelines. 6.20 MANAGEMENT OF LEGACY
ACCOUNTS Legacy accounts refers those accounts opened before 30 April, 2002 and
yet to update KYC procedures. Branch has marked these legacy accounts as
―Dormant‖. No withdrawal shall be permitted in those accounts; however, deposit
can be permitted. These accounts will be fully functional only after conducting
proper CDD measures. Branch shall send the list of Dormant account to Anti
Money Laundering Department, Head Office for further preservation. Page 59 of
138 RECORD KEEPING 7.1 INTRODUCTION Record keeping is an essential component of
the audit trail that the Laws and Regulations seek to establish in order to
assist in any financial investigation and to ensure that criminal funds which
are kept out of the financial system, or if not, that they may be detected and
confiscated by the authorities. Mercantile Bank must retain records concerning
customer identification and transactions as evidence of the work they have
undertaken in complying with their legal and regulatory obligations, as well as
for use as evidence in any investigation conducted by law enforcement. 7.2
LEGAL OBLIGATIONS Obligations under MLPA, 2012 The reporting organizations
shall have to preserve previous records of transactions of any close account
for at least 5(five) years from the date of such closure and provide with the
information maintained under the clause to Bangladesh Bank. Obligations under
MLP Rules, 2013 The bank shall maintain all necessary records of all
transactions, both domestic and international, for at least five years from the
date of the closure of the account or at least five years from the date of the
completion of any one-off transaction in following manners: 1. Transaction
records should be sufficient to permit reconstruction of individual
transactions so as to provide, if necessary, evidence for prosecution of
criminal activity; 2. The bank shall keep all records obtained through CDD
measures, account files and business correspondence, and results of any
analysis undertaken, for at least five years following the termination of the
business relationship or after the date of the occasional transaction; 3. The
bank shall ensure that all CDD information and transaction records are
available swiftly to BFIU or available to the respective investigation
authority upon appropriate court order. 7.3 OBLIGATIONS UNDER CIRCULAR
Obligations under BFIU Circular-10; dated 28/12/2014 1. All necessary
information/documents of customer's domestic and foreign transactions has to be
preserved for at least 5(five) years after closing the account. 2. All
information and documents collected during CDD procedure along with KYC,
account related documents, business correspondence and any report prepared on a
customer has to be preserved for at least 5(five) years after closing the
account. 3. All necessary information/documents of a walk-in Customer's
transactions has to be preserved for at least 5 (five) years from the date of
transaction. 4. Preserved information has to be sufficient for presenting as a
documentary proof for the judiciary process of the offence. 5. Bank should
provide all information and documents collected during CDD along with KYC
procedure and information and documents of transactions as per the instruction
or demand by BFIU. Page 60 of 138 7.4 RECORDS TO BE KEPT The precise nature of
the records required is not specified in the legal and regulatory regime. The
objective is to ensure that a bank meets its obligations and that, in so far as
is practicable, in any subsequent investigation the bank can provide the
authorities with its section of the audit trail. The records must cover: customer informationØ transactionsØ
internal and external suspicion reportsØ report from CCU/AMLD/CAMLCOØ training and compliance monitoringØ information about the effectiveness of
trainingØ 7.5
CUSTOMER INFORMATION In relation to the evidence of a customer‘s identity,
branch must keep a copy of or the references to, the evidence of the customer‘s
identity obtained during the application of CDD measures. Where branch has
received a confirmation of identity certificate, this certificate will in
practice be the evidence of identity that must be kept. Branch may often hold
additional information in respect of a customer obtained for the purposes of
enhanced customer due diligence or ongoing monitoring. Records of
identification evidence must be kept for a period of at least five years after
the relationship with the customer has ended. The date when the relationship
with the customer ends is the date: an
occasional transaction, or the last in a series of linked transactions, is
carried out;· or the business relationship ended, i.e. the
closing of the account or accounts.·
7.6 TRANSACTIONS All transactions carried out on behalf of or with a customer
in the course of relevant business must be recorded within the branch‘s
records. Transaction records in support of entries in the accounts, in whatever
form they are used, e.g. Credit/debit slips, cheques should be maintained in a
form from which a satisfactory audit trail may be compiled where necessary, and
which may establish a financial profile of any suspect account or customer.
Records of all transactions relating to a customer must be retained for a
period of five years from the date on which the transaction is completed. MBL
must retain the records of all transactions of any close account for at least
5(five) years from the date of such closure and provide with the information to
Bangladesh Bank on its demand in accordance the instruction of MLPA -2012
Section 25(1) (b). Page 61 of 138 7.7 INTERNAL AND EXTERNAL REPORT MBL will
make and retain: records of actions
taken under the internal and external reporting requirements;Ø and when the nominated officer has considered
information or other material concerningØ
possible money laundering but has not made a report to BFIU, a record of the
other material that was considered. In addition, copies of any STRs made to the
BFIU must be retained for five years. Records of all internal and external
reports will be retained for five years from the date the report was made. 7.8
OTHER MEASURES The records of MBL will include: (a) in relation to training: dates AML training was given;§ the nature of the training;§ the names of the staff who received training;
and§ the results of the tests undertaken by staff,
where appropriate.§ (b)
in relation to compliance monitoring reports by the MLRO to senior management; and§ records of consideration of those reports and
of any action§
taken as a consequence. 7.9 FORMATS AND RETRIEVAL OF RECORDS To satisfy the
requirements of the law and to meet the purpose of record keeping, MBL i s
capable of retrieval without undue delay. MBL has reliable procedures for
keeping the hard copy at a central archive, holding records in electronic form
and that can be reproduced and recollected without undue delay. All concerned
shall ensure flowing appropriate procedure in this regard. 7.10 REQUIRED FILES
FOR AML/CFT COMPLIANCE IN BRANCH LEVEL Branches are maintaining the following
files for record keeping: 1. BAMLCO Office Order Preserving File 2. AML
Training related Office Order File 3. AML & CFT Compliance Meeting File
(Quarterly) 4. Sanction Screening File: a. UN & OFAC Sanction List b.
Existing A/C‘ False/True Positive Statement c. Remittance Screening d. L/C
Beneficiary/ Applicant, Bank Name & Vessel e. SWIFT Screening 5. Risk
Grading File: a. List of High Risk A/c and related documents Page 62 of 138 b.
List of IP & PEPs A/c and related documents 6. Transaction Profile (TP)
Monitoring File 7. Self Assessment Evaluation Report (Half Yearly) File 8. KYC
update File 9. Thanks Letter or Address Verification Letter File 10.
Transaction Monitoring File 11. CTR Monitoring File 12. STR / SAR File a. Find
out STR / SAR at Branch Level b. STR sends to CCU at Head Office 13.
Structuring Report File 14. Bangladesh Bank AML Inspection File 15. AML/BFIU
Circulars / Circular Letters File 16. Internal AML Circular / Instruction /
Memo File 17. Walking / Online Customer KYC File 18. Close Account List 19. Internal
/ External AML Audit Report and compliance File 20. BAMLCO Activities File (As
per Instruction Circular – 893) 21. Miscellaneous File etc. Page 63 of 138 22.
Page 64 of 138 REPORTING TO BFIU 8.1 LEGAL OBLIGATIONS: Obligations under MLPA,
2012 The reporting organizations shall have to report any suspicious
transaction (defined in Section 2(Z) of MLPA, 2012 and Section 2(16) of ATA,
2009) to the Bangladesh Bank immediately on its own accord. Obligations under
MLP Rules, 2013 Every bank is obliged to send various reports (suspicious
transaction, suspicious activity, cash transaction, self assessment,
independent testing procedure etc.) to Bangladesh Bank without any delay or in
due time. Besides they have to produce any documents that is sought by Bangladesh
Bank. 8.2 SUSPICIOUS TRANSACTION REPORTING Money Laundering Prevention Act,
2012 defines suspicious transaction as follows- ‗suspicious transaction‘ means
such transactions – which deviates from
usual transactions;Ø of which there is ground to suspect that,Ø o the property is the
proceeds of an offence, o it is financing to any terrorist activity, a
terrorist group or an individual terrorist; which is, for the purposes of this Act, any
other transaction or attempt of transaction delineatedØ in the instructions issued by
Bangladesh bank from time to time. Anti-Terrorism Act, 2009 defines suspicious
transaction as follows- ‗suspicious transaction‘ means such transactions – which is different from usual transactions;Ø which invokes presumption that,Ø o it is the proceeds of
an offence under this Act, o it relates to financing of terrorist activities or
a terrorist person or entity; which is
any other transactions or an attempt for transactions delineated in the
instructions issuedØ by
the Bangladesh Bank from time to time for the purposes of this Act. The final
output of an AML & CFT compliance program is reporting of suspicious
transaction or reporting of suspicious activity. Suspicious Transaction Report
(STR) or Suspicious Activity Report (SAR) is an excellent tool for mitigating
or minimizing the AML & CFT risk for MBL. Therefore it is necessary for the
safety and soundness of MBL. Page 65 of 138 8.3 IDENTIFICATION OF STR/SAR
Branch normally identify the STR/SAR by scrutinizing unusual transaction and
activity. Such unusual transaction may be unusual in terms of complexity of
transaction, nature of transaction, volume of transaction, time of transaction
etc. Generally the detection of something unusual may be sourced as follows: Comparing the KYC profile, if any
inconsistency is found and there is no reasonable explanation;Ø By monitoring customer transactions;Ø By using red flag indicator.Ø A transaction which
appears unusual is not necessarily suspicious. Even customers with a stable and
predictable transactions profile will have periodic transactions that are
unusual for them. Many customers will, for perfectly good reasons, have an
erratic pattern of transactions or account activity. So the unusual is, in the
first instance, only a basis for further enquiry, which may in turn require
judgment as to whether it is suspicious. A transaction or activity may not be
suspicious at the time, but if suspicions are raised later, an obligation to
report then arises. Branch will identify STR /SAR related to ML / TF as per
some red flag indicators which are mentioned in Annexure-C. Branch will report
STR/SAR to the Anti Money Laundering Department (AMLD), Head Office with proper
documents. The report will include full details of the customer who is the subject
of concern and as full a statement as possible of the information giving rise
to the suspicion. All internal enquiries made in relation to the report will
also be documented. This information may be required to supplement the initial
report or as evidence of good practice and best endeavors if, at some future
date, there is an investigation and the suspicions are confirmed or disproved.
Follow chart for identifying the STR/SAR by Mercantile BankAs discussed above,
the identification of STR/SAR may be sourced from unusual transaction or
activity. In case of reporting of STR/SAR, branch should conduct the following
3 stages: Page 66 of 138 Identification: This stage is very vital for STR/SAR
reporting. Depending on size, need and complexity of bank monitoring of unusual
transactions may be automated, manually or both. Mercantile Bank has been using
software to detect unusual transactions or activities. Training of staff in the
identification of unusual /suspicious activity is an ongoing activity of our
Bank. Evaluation: After identification of STR/SAR at branch level, BAMLCO will
evaluate the transaction/activity to identify suspicion by interviewing the
customer or through any other means. If BAMLCO is not satisfied, he should
forward the report to AMLD. After receiving report from a branch, AMLD should
check the sufficiency of the required documents. Every stages of evaluation
(whether reported to BFIU or not), Branch should keep records with proper
manner. Disclosure: This is the final stage and bank should submit STR/SAR to
BFIU if it still looks suspicious. For simplification, the flow chart given
below shows STR/SAR identification and reporting procedures: 8.4 TIPPING OFF
The officials of MBL will consider the confidentiality of the reporting of
STR/SAR. They will not make any behavior or performance that could tip-off the
customer and he/she (the customer) could be cautious. 8.5 CASH TRANSACTION
REPORT Every branch of MBL prepares the monthly cash transaction report and
send it to AMLD in due time. If the branch has not any such transaction, it
will report to AMLD as ‗There is no reportable CTR‘. After preparing Page 67 of
138 CTR, our branches will examine the CTR data, whether any suspicious
transaction is occurred or not in the CTR. If any suspicious transaction is
found, the branch will submit it as ‗Suspicious Transaction Report‘ to the
AMLD. If no such transaction is identified, it needs to inform to the AMLD as
‗No suspicious transaction has been found‘ while reporting the CTR and every
branch needs to preserve its CTR in their own branch. After receiving CTR data
from Branches, Anti Money Laundering Department (AMLD) will prepare the
accumulated CTR and send it to BFIU, Bangladesh Bank through goAML within
stipulated time. AMLD has to inform BFIU through the message board of goAML web
in case of no transaction is found to be reported as CTR. Moreover, AMLD must
preserve the information related to cash transaction report up to 5 (five)
years from the month of submission to BFIU. 8.6 SELF ASSESSMENT REPORT Branches
of MBL prepare Self Assessment to evaluate them through a checklist that is
circulated by BFIU circular no. 10, dated 28 December, 2014. Before finalizing
the evaluation report, Branch will arrange a meeting about prevention of ML
& TF; if the identified problems according that report are possible to
solve at the branch level, then necessary actions should be taken without any
delay to finalize it; and in the final report, recommendations shall have to be
jotted down. In the subsequent quarterly meetings on preventing money
laundering and terrorist financing, the progress of the related matters shall
be discussed. After the end of every half year, the branch will submit their
evaluation report along with the measures taken by the branch in this regard
and adopted recommendations regarding the issue to the Internal Control and
Compliance Division (ICCD) of the Head Office and the Anti Money Laundering
Department within the 15th of the next month. CCU will arrange meeting to
review the Self Assessment of each branch. 8.7 INDEPENDENT TESTING PROCEDURE
Independent testing has to be done through a checklist that is circulated by
BFIU circular no. 10; dated 28th December, 2014 by the independent audit (i.e.
performed by people not involved with the bank‘s AML&CFT compliance). The
individuals conducting the audit should report directly to the board of
directors/senior management. Audit function shall be done by the internal audit
or ICC. At the same time external auditors could be appointed (if possible) to
review the adequacy of the program. 8.8 INTERNAL CONTROL & COMPLIANCE
DIVISION‘S (ICCD‘s) OBLIGATIONS REGARDING SELF ASSESSMENT OR INDEPENDENT
TESTING PROCEDURE The Internal Audit Department of ICCD shall assess the branch
evaluation report received from the branches and if there is any risky matter
realized in any branch, they shall inspect the branch immediately and shall
inform the matter to the AMLD. While executing inspection/audit activities in
various branches according to their own regular yearly inspection/audit
schedule, the Internal Audit Department will examine the AML & CFT
activities of the Page 68 of 138 concerned branch using the specified
checklists for the Independent Testing Procedure. The ICCD will send a copy of
the audit report with the rating of the branches to the AMLD, Head Office. Then
AMLD send the Checklist to related Branch for compliance. After comply the
lapses, Branch accordingly send their reply to AMLD. 8.9 CENTRAL COMPLIANCE
UNIT‘S OBLIGATIONS REGARDING SELF ASSESSMENT OR INDEPENDENT TESTING PROCEDURE
After receiving the evaluation report from the branches and inspection/audit
reports from ICCD Anti Money Laundering Department, Head Office will prepare
Self Assessment Report on Half yearly basis. While preparing Self Assessment
Report by AMLD, the following topics must be included: a) Total number of
branch and number of self assessment report received from the branches; b) The
number of branches inspected/audited by the Internal Audit Department at the
time of reporting and the status of the branches (branch wise achieved number);
c) Same kinds of irregularities that have been seen in maximum number of
branches according to the received self assessment report and measures taken by
the CCU to prevent those irregularities. d) The general and special
irregularities mentioned in the report submitted by the Internal Audit
Department and the measures taken by the CCU to prevent those irregularities;
and e) Measures to improve the ratings by ensuring the compliance activities of
the branches that are evaluated as ‗unsatisfactory‘ and ‗marginal‘ in the
received report. AMLD will submit the report to MD & CEO and Board of
Directors on half yearly basis. After receiving the MD‘s comments & Board
of Directors observations; then the Report to be submitted to BFIU, Bangladesh
Bank within stipulated time. Page 69 of 138 RECRUITMENT, TRAINING AND AWARENESS
9.1 OBLIGATIONS UNDER CIRCULAR According to instruction BFIU circular-10,
Mercantile Bank Limited will follow proper Screening Mechanism in case of
recruitment and ensure proper training to mitigate the risk of money
laundering, terrorist financing and proliferation of weapons of mass
destruction. Obligations under BFIU Circular-10; dated 28/12/2014 To mitigate
the risk of money laundering, terrorist financing and proliferation of weapons
of mass destruction, bank should follow proper Screening Mechanism in case of
recruitment and ensure proper training for their officials. 9.2 EMPLOYEE
SCREENING Mercantile Bank is performing its activities for proper maintaining
of ML & TF risk from its customers as well as from its employee in absence
of proper risk mitigating measures. MBL follows fair recruitment procedure to
minimize the ML & TF risks arose by or through its employees. This fair
recruitment procedure shall include implementation of fairness in judging
publicly declared competitive recruitment that also includes the judgment of
good character. For this we are following the under mentioned measures: reference checkØ
background checkØ personal interviewingØ personal guarantee etc.Ø MBL will examine the consistency
and capability of the employee and will arrange necessary training on AML &
CFT lessons for the particular job or desk before assigning an employee in a
particular job or desk, 9.3 KNOW YOUR EMPLOYEE (KYE) There are a lot of
instances that highlight the involvement of employees in fraudulent
transactions and in most cases in association with customers. This therefore
brings in sharp focus the need for thorough checks on employees' credentials
and proper screening of candidates to prevent the hiring of undesirables.
Policies, procedures, job descriptions, internal controls, approval levels,
levels of authority, compliance with personnel laws and regulations, code of
conduct/ethics, accountability, dual control, and other deterrents shall be
firmly in place. And the auditor must conversant with these and other
requirements, and see that they are constantly and uniformly updated. 9.4
TRAINING FOR EMPLOYEE Every employee of MBL shall have at least basic AML &
CFT training that cover all the aspects of AML & CFT measures in
Bangladesh. Basic AML & CFT training is at least day long model having
evaluation module of the trainees. Relevant provision of Acts, rules and
circulars, guidelines, regulatory requirements, suspicious transaction or
activity reporting must be covered in basic AML & CFT training course. To
Page 70 of 138 keep the employees updated about AML & CFT measures, MBL
impart refreshment training programs of its employees on a regular basis. AML
& CFT basic training shall cover the following- an overview of AMLØ & CFT initiatives; relevant provisions of MLPAØ & ATA and the rules
there on; Uniform Account Opening Form,
KYC, TPØ
& Risk Grading regulatory
requirements as per BFIU circular, circular letters and guidelines;Ø STR/SAR reporting procedure;Ø ongoing monitoring and sanction screening
mechanism;Ø
Besides basic and refreshment AML & CFT training, MBL also arrange job
specific training or focused training i.e., Trade based money laundering
training for the trade professional employees who deal with foreign or domestic
trade, UNSCR screening related training for all employees who deal with
international transactions, customer relations and account opening; credit
fraud and ML related training for all the employees who deal with advance and
credit of the bank; customer due diligence and ongoing monitoring of
transaction related training for the employees who conduct transaction of
customers. 9.5 AWARENESS OF SENIOR MANAGEMENT Mercantile Bank will arrange from
time to time an awareness program for all the members of its board of
directors, members of the senior management and people engaged with policy
making of the bank. 9.6 CUSTOMER AWARENESS Bank shall take proper actions for
broadcasting awareness building advertisement and documentaries regarding
prevention of money laundering and terrorist financing through different mass
media under Corporate Social Responsibility (CSR) fund. 9.7 AWARENESS OF MASS
PEOPLE Prevention of ML & TF largely depends on awareness at all level.
Public or mass people awareness on AML & CFT measures provides synergies to
banks in implementing the regulatory requirement. M e r c a n t i l e Bank will
arrange public awareness programs like advertisements through billboard,
poster, festoon and mass media, distribution of handbills, leaflet and so on.
Page 71 of 138 TERRORIST FINANCING & PROLIFERATION FINANCING 10.1
INTRODUCTION Bangladesh has criminalized terrorist financing in line with the
International Convention for the Suppression of the Financing of Terrorism
(1999). Section 16 of Anti-terrorism Rules, 2013 states the responsibilities of
the reporting agencies regarding funds, financial assets or economic resources
or related services held in or through them. A bank that carries out a
transaction, knowing that the funds or property involved are owned or
controlled by terrorists or terrorist organizations, or that the transaction is
linked to, or likely to be used in, terrorist activity, is committing a
criminal offence under the laws of Bangladesh. Such an offence may exist
regardless of whether the assets involved in the transaction were the proceeds
of criminal activity or were derived from lawful activity but intended for use
in support of terrorism. 10.2 LEGAL OBLIGATIONS Obligations under ATA, 2009
Every Bank should take necessary measures, with appropriate caution and
responsibility, to prevent and identify financial transactions through which it
is connected to any offence under ATA, 2009 and if any suspicious transaction
is identified, the agency shall spontaneously report it to Bangladesh Bank
without any delay. The Board of Directors, or in the absence of the Board of
Directors, the Chief Executive, by whatever name called, of each bank should
approve and issue directions regarding the duties of its officers, and shall
ascertain whether the directions issued by Bangladesh Bank under section 15 of
ATA, 2009; which are applicable to the bank, have been complied with or not.
10.3 OBLIGATIONS UNDER CIRCULAR Obligations under BFIU Circular-10; dated
28/12/2015 Every bank shall establish a procedure by approval of Board of
Directors for detection and prevention of financing of terrorism and financing
of proliferation of weapons of mass destruction, shall issue instructions about
the duties of Bank officials, review those instruction time to time and ensure
that they are complying with the instructions issued by BFIU. Before any
international business transaction, every bank will review the transaction to
identify whether the concerned parties of that transactions are individual or
entity of the listed individual or entity of any resolution of United Nation
Security Council or listed or proscribed by Bangladesh government. Immediately
after the identification of any account of any listed individual or entity
concerned bank will stop that transaction and inform BFIU the detail
information at the following working day. 10.4 NECESSITY OF FUNDS BY TERRORIST
Terrorist organizations need money to operate. Weapons and ammunition are
expensive. Major Page 72 of 138 international operations require substantial
investments for personnel, training, travel and logistics. Organizations must
have substantial fundraising operations, as well as mechanisms for moving funds
to the organization and later to terrorist operators. These functions entail
considerable risk of detection by authorities, but also pose major challenges
to both the terrorists and intelligence agencies. 10.5 SOURCES OF FUND/RAISING
OF FUND In general, terrorist organizations may raise funds through: legitimate
sources, including through abuse of charitable entities or legitimate
businesses and self-financing, criminal activity, state sponsors and activities
in failed states and other safe havens. 10.6 MOVEMENT OF TERRORIST FUND There
are three main methods to move money or transfer value. These are: the use of the financial system,Ø the physical movement of money (for example,
through the use of cash couriers) andØ
the international trade system.Ø Often, terrorist
organizations will abuse alternative remittance systems (ARS), charities, or
other captive entities to disguise their use of these three methods to transfer
value. Terrorist organizations use all three methods to maintain ongoing
operation of the terrorist organization and undertake specific terrorist
activities. 10.6.1 FORMAL FINANCIAL SECTOR Financial institutions and other
regulated financial service providers' services and products available through
the formal financial sector serve as vehicles for moving funds that support
terrorist organizations and fund acts of terrorism. The speed and ease with
which funds can be moved within the international financial system allow
terrorists to move funds efficiently and effectively and often without detection
between and within jurisdictions. Combined with other mechanisms such as
offshore corporate entities, formal financial institutions can provide
terrorists with the cover they need to conduct transactions and launder
proceeds of crime when such activity goes undetected. 10.6.2 TRADE SECTOR The
international trade system is subject to a wide range of risks and
vulnerabilities which provide terrorist organizations the opportunity to
transfer value and goods through seemingly legitimate trade flows. To exploit
the trade system for terrorist financing purposes could assist in the
development of measures to identify and combat such activity. 10.6.3 CASH
COURIERS The physical movement of cash is one way terrorists can move funds
without encountering the AML/CFT safeguards established in financial
institutions. It has been suggested that some groups have converted cash into
high-value and hard-to-trace commodities such as gold or precious stones in
order to move assets outside Page 73 of 138 of the financial system. The
movement of cash across the borders is prevalent in the cash based economy and
where the electronic banking system remains embryonic or is little used by the
populace. Moving money using cash couriers may be expensive relative to wire
transfers. As legitimate financial institutions tighten their due diligence
practices, it has become an attractive method of transferring funds without
leaving an audit trail. When cross border remittance of cash is interdicted,
the origin and the end use of cash can be unclear. Cash raised and moved for
terrorist purposes can be at very low levels – making detection and
interdiction difficult. 10.6.4 USE OF ALTERNATIVE REMITTANCE SYSTEMS (ARS)
Alternative remittance systems (ARS) are used by terrorist organizations for
convenience and access. ARS have the additional attraction of weaker and/or
less opaque record-keeping and in many locations may be subject to generally
less stringent regulatory oversight. Although FATF standards call for
significantly strengthened controls over such service providers, the level of
anonymity and the rapidity that such systems offer have served to make them a
favored mechanism for terrorists. 10.6.5 USE OF CHARITIES AND NON-PROFIT
ORGANISATIONS Charities are attractive to terrorist networks as a means to move
funds. Many thousands of legitimate charitable organizations exist all over the
world that serve the interests of all societies, and often transmit funds to
and from highly distressed parts of the globe. Terrorist abuses of the charitable
sector have included using legitimate transactions to disguise terrorist cash
travelling to the same destination; and broad exploitation of the charitable
sector by charities affiliated with terrorist organizations. The sheer volume
of funds and other assets held by the charitable sector means that the
diversion of even a very small percentage of these funds to support terrorism
constitutes a grave problem. 10.7 TARGETED FINANCIAL SANCTIONS In recent years,
the concept and strategy of targeted sanctions imposed by the United Nations
Security Council under Chapter VII of the Charter of the United Nations, have
been receiving increased attention. Most of the countries agree that better
targeting of such measures on the individuals responsible for the policies
condemned by the international community, and the elites who benefit from and
support them, would increase the effectiveness of sanctions, while minimizing
the negative impact on the civilian population. The considerable interest in
the development of targeted sanctions regimes has focused primarily on
financial sanctions, travel and aviation bans, and embargoes on specific
commodities such as arms or diamonds. Targeted financial sanctions entail the
use of financial instruments and institutions to apply coercive pressure on
transgressing parties—senior officials, elites who support them, or members of
non-governmental entities—in an effort to change or restrict their behavior.
Sanctions are targeted in the sense that they apply only to a subset of the
population—usually the leadership, responsible elites, or operationally
responsible individuals; they are financial in that they involve the use of
financial instruments, such as asset freezing, blocking of financial
transactions, or financial services; and they are sanctions in that they are
coercive measures applied to effect change or constrain action. However,
targeted financial sanctions represent a potential refinement of the sanctions
tool that could be Page 74 of 138 used in conjunction with other coercive
efforts, such as travel bans, to minimize the unintended effects of
comprehensive sanctions and achieve greater effectiveness. To implement TFS in
Bangladesh, the Government has issued Statutory Regulatory Order (SRO) under
section 2 of the United Nations (Security Council) Act, 1948 (29 November,
2012) and amended the SRO to make it more comprehensive (June, 2013). To make
the process enforceable, a separate section has been included in ATA, 2009
through amendment of ATA in 2013. Section 20(A) of ATA, 2009 covers all the
requirements under UNSCR‘s tool were taken and will be taken under chapter VII
of the charter of UN. Before that BFIU used to issue circular letters for
reporting organizations to implement UNSCR resolutions. For effective implementation
of these provisions, MBL as a reporting agency has to maintain and update the
listed individuals and entities in electronic form and regularly run a check at
the website of United Nations for updated list. In case there is any fund or
economic resources held by the listed individuals and entities, MBL shall
immediately stop payment or transaction of funds, financial assets or economic
resources and report to the BFIU within the next working day with full
particulars of the listed and/or the suspected individuals or entities or
related or connected individual identities. 10.8 AUTOMATED SCREENING MECHANISM
OF UNSCRs For effective implementation of TFS relating to TF & PF
Mercantile Bank has already implemented Automated Screening Solution. Data Soft
Systems Bangladesh has provided a software name Velocity-AML Solutions Suite
for implementing Automated Screening Solution in our bank. MBL ensure that
screening has done before- any
international relationship or transaction;ü
opening any account or establishing
relationship domestically.ü
For proper implementation of UN sanction list, official of MBL must have enough
knowledge about- legal obligation and
consequences of non-compliance;Ø
sources of information;Ø what to do and how to do with sanction list;Ø transactional review;Ø how to deal with ‗false positives‘;Ø how to deal with actual match;Ø how to deal with ‗aggrieved person or entity‘;Ø how to exercise ‗exemption‘ requirements;Ø listingØ
& de-listing process. The descriptions and functions of Velocity-AML
Solutions Suite are furnished below: Page 75 of 138 Velocity-AML Solutions
Suite Velocity is a powerful and scalable AML workflow with case management
system specifically designed for facilitating AML workflow and reporting. The
system integrates seamlessly with other existing AML Systems and also can be
used on its own to perform on boarding (KYC), alerts reviews, CDD/EDD, and
periodic reviews. The system is capable to communicate with UNSCR/OFAC/EU/UK
Central Bank‘s list and other sanctions list through web service or can import
data from those sites to work offline. Modules of the Software: New Customer screening module Integrated with
CBS· AML Admin and On demand Screening· & Related Report Existing Customer Screening· & Related Report
Module Payment Interdiction on Swift· & Related Report
Module KYC/CDD/EDD, TP· & Related Report
Module Case Management· & Related Report
Module Workbench of the software Velocity-AML Solutions suite is a workflow and
workbench based solutions. For User perspective the system has been divided by
following workbench. Customer officer
Workbench· BAMLCO Workbench·
DCAMLCO Workbench· CAMLCO Workbench and· AML Admin Workbench· Sanction list consider the
software Velocity-AML Solutions suite considers the following sanctions list
but not limited. It has options to incorporate more sanction list. UNSCR·
OFAC SDN·
EU list·
UK List·
Central Bank List· Bank‘s own list·
Hong Kong list· What to do and How to do With
Sanction list Bank‘s existing customer and any customer before account open
will have to screen against the sanction list. Any transaction with other
bank/other account will have to screen prior the transaction. To comply and
perform the screening we are using a solution called Velocity-AML Solutions
suite. Page 76 of 138 The following requirements will be screened by this
application : 1. Screen prior to any account opening 2. Screen against existing
customer and rescreen periodically when sanction list update by the authority.
3. Before SWIFT message send and after receive any swift message screen against
sanction list 4. Inward/Outward any remittance screen by the system 5. Bearer
Check screen by the system Application directly connected with UN sanction list
authority website through web service. It automatically update application‘s
database from UN sanction authority site. Than Any screening performed by the
application against it‘s local updated database. Transactional Review The
purpose of AML transactional review is to provide ongoing identification of
suspicious activity from customer transaction data. It is generally a two-stage
process whereby first, instance of potentially suspicious behavior are
identified or flagged and then these instance of potentially suspicious
behavior are reviewed by an analyst to determine if, ultimately a SAR should be
filed. To Identify potentially suspicious behavior we have implemented
Velocity-AML solutions suite . The system fed data from our CBS system and
analyze on the data .It filter, complies and summarize transactional data and
flag instance of potential suspicious. Match Algorithms Used in the Software As
per Bangladesh Bank‘s instruction, Application uses fuzzy algorithm and
Phonetics algorithm individual and both in combination. Jaro-winkler use for
fuzzy matching and soundex uses for phonetics matching. False Positive Handling
Procedure False positive is a test result which incorrectly indicates that a
particular condition or attribute is present. As the application uses fuzzy
logic and phonetic matching algorithm, Match result returns the score/
percentage of the matching. System is configurable the matching parameters.
Initially it consider the name , country and address but there have option to
match father name, mother name, DOB, passport number etc. The following series
of steps we use to reduce the number of false positives: Screen sentences
separately: Filters separate names, addresses and cities from other data. They
not combine these with other data in the sentence. Screen accounts separately:
Filters screen personal and corporate/Legal entity accounts separately. Screen
vessels separately and match names with vessel names: Shipping vessels or cargo
ships have been a specific focus of OFAC over the past several years .So Our
Application screen vessel separately in OFAC, UN sanction list along with other
list. Page 77 of 138 Match found handling Procedure If any customer found match
with any of the sanction list, system automatically hold the customer status
and send upper level for approval and review. In branch level BAMLCO make
decision by reviewing customer details and sanction list detail. If he seems
that the customer is under sanction list, he puts his comments and
justification and block the customer to make any transaction. In that case an
instruction goes to CBS system and CBS routine block the customer immediately.
If any customer found the match with any sanction list, the system creates
alert and notify the responsible person to clear alert. In that case responsible
person take necessary action to clear alert and follow the systems workflow
procedure. The system workflow is given in following section briefly. Brief
User instruction and work flow Login Login is the startup page of the solution.
Each and every user must login using this form to access the solution. User
will able to login using following credentials. 1. User Name ( Enter admin
provided user name) 2. Role ( Select software role like Customer officer/
BAMLCO/DAMLCO/CAMLCO) 3. Password. (Enter your password) User Name Select Role
Password Page 78 of 138 4. Press enter/ click on Login button for login.
Entering valid user name, Role and password user will able to view role wise
workbench to perform his task. New Customer screening module Integrated with
CBS This module is integrated with CBS and Velocity-AML Solutions suite.
Velocity-AML Solutions suite placed in between of the customer creation and
authorization system. When a CO adds a new customer in Core Banking Solutions
(CBS), he will be not able to ―Authorize‖ the customer from CBS until the
customer has been screened and ―Released‖ from Velocity-AML Solutions Suite.
Workflow of New Customer screening by MBL Page 79 of 138 CBS Client 1 Screening
process performed by AML solution Released Release/Block Full cycle of AML
Generate csv file for AML Prevent Authorization of Hold customer and Authorize
released customer Move CSV and Authorize pending queue with Status CBS Client 2
CBS Client 3 CBS Client n End 1. Click on CBS Screening tab, the screen will
appear as below- Page 80 of 138 Fig: CBS Match Data List 2. Then select
Individual customer or multiple customers and click Search List tab for
Screening 3. After Click in Search list below Screening will appear. 4.
Clicking on highlighted tag, then appear below this screenFig: Entry Screen 5.
Customer Officer can view individual customer information and fill up required
information (Change Status, Select forward to upper level, etc.) and save it by
click in Save Button and take a print as a PDF. Page 81 of 138 On demand
screening On demand screening module is a common screening module. It can be
used for multipurpose. Initially it will use for following type of screening. Walking customer screening· Remittance of cash pickup· Bearer Check·
LC etc.·
Without these it can used for multipurpose. Customer Officer Workbench:
Normally Customer officer initiate screening. 1. Screen a Customer 2. Check
data from the matching data list. 3. Select Type of Entry 4. Input
corresponding information. 5. If no match list found then input corresponding
information. 6. Save Data with Status HOLD/FALSE POSITIVE and forward to UPPER
LEVEL for further processing BAMLCO Workbench: All data forwarded UPPER LEVEL
by Customer officer is received by BAMLCO 1. Select Data from NEW Tab 2. Give
Comment , Status 3. Select Forward to UPPER LEVEL if further investigation
needed or select NONE 4. Save Data DCAMLCO Workbench: All data forwarded UPPER
LEVEL by BAMLCO is received by DCAMLCO 1. Select Data from NEW Tab 2. Give
Comment , Status 3. Select Forward to UPPER LEVEL if further investigation
needed or select NONE 4. Save Data CAMLCO Workbench: All data forwarded UPPER
LEVEL by DAMLCO is received by CAMLCO 1. Select Data from NEW Tab 2. Give
Comment , Status 3. Save Data BAMLCO/ DCAMLCO/CAMLCO can give common comments,
status and forward to data for all selected Customer. Page 82 of 138 All
Pending data is available in pending tab, and all close data is available in
Close tab. Remittance Remittance officer Workbench: 1. Upload File with
remittance Data 2. Select Data From New Tab Data List 3. Screening If no match found then save data with Status
Released.Ø If Match found then data is saved with
matching details and send to remittance Approver forØ further process. Remittance Approver
Workbench: All data forwarded UPPER LEVEL by Remittance officer is received by
Remittance Approver. 1. Select Data from NEW Tab 2. Give Comment , Status 3.
Select Forward to UPPER LEVEL if further investigation needed or select NONE 4.
Save Data CAMLCO Workbench: All data forwarded UPPER LEVEL by Remittance
Approver is received by CAMLCO 1. Select Data from NEW Tab 2. Give Comment ,
Status 3. Save Data Remittance Officer, Remittance Approver can give common
comments, status and forward to data for all selected Customer. All Pending
data is available in pending tab, and all close data is available in Close tab.
Existing Customer Screen Admin Workbench: 1. Synchronize Existing Customer
Data. 2. Select Branches for Screening from Screening Tab. 3. Screening If no match found then save data with Status
Released.Ø If Match found then data is send to Customer
officer for further process.Ø
Customer Officer Workbench: Normally Customer officer initiate screening for
matching Customer. Page 83 of 138 1. Select Customer from list. 2. Screen and
send to UPPER LEVEL with Matching Details BAMLCO Workbench: All data forwarded
UPPER LEVEL by Customer officer is received by BAMLCO 1. Select Data from NEW
Tab 2. Give Comment , Status 3. Select Forward to UPPER LEVEL if further
investigation needed or select NONE 4. Save Data DCAMLCO Workbench: All data
forwarded UPPER LEVEL by BAMLCO is received by DAMLCO 1. Select Data from NEW
Tab 2. Give Comment , Status 3. Select Forward to UPPER LEVEL if further
investigation needed or select NONE 4. Save Data CAMLCO Workbench: All data
forwarded UPPER LEVEL by DAMLCO is received by CAMLCO 1. Select Data from NEW
Tab 2. Give Comment , Status 3. Save Data BAMLCO/ DCAMLCO/CAMLCO can give
common comments, status and forward to data for all selected Customer. All
Pending data is available in pending tab, and all close data is available in
Close tab. Reverse Screening: If any update in the sanction available then
rescreen is performed by admin. Page 84 of 138 Start Sanction List Update Send
notification to Admin and CAMLCO Yes Sync complete By Admin Send notification
to CO for scanning Yes Stop Is there any pending customer in CO Workbench ?
Close All pending customer Rescreen all customer against updated list Is Review
date of all customer > list Update date ? Delete all from Update List Yes No
Chek whether it will be send to upper level or not ? Yes Update Review Date No
Match Found No Send to upper level yes 1. Synchronize Customer Data. 2.
Rescreen data against sanction list update data 3. If no match found then save
in history. 4. If Match found then data is send to Customer officer for further
process. Page 85 of 138 SWIFT Screening Incoming Message 1. AFT service will
store the messages in given ―AFT Input‖ folder. From this folder AML solution
will read and scan the message. After reading if no match found then it will
move the message to ―CBS Input‖ folder and from that folder CBS will read the
message. 2. If match found then AML will move the message to ―Blocked In‖
folder. And it will wait for decision of the designated person. If he releases
the message then it will move the massage to ―CBS Input‖ folder. Outgoing
Message 1. After generating the message CBS will store the message in ―CBS Out‖
folder. AML solution will read and scan the message. After reading if no match
found then it will move the message to ―AFT Out‖ folder and from that folder
AFT will send the message. 2. If match found then AML will move the message to
―Blocked Out‖ folder. And it will wait for decision of the designated person.
If he releases the message then it will move the massage to ―CBS Out‖ folder.
CBS Output (CBSOut Folder) AFT Input (Out going message) (AFTOut folder) AFT
Output (Incoming message) (AFTIn Folder) Alliance lite 2 or above CBS Input
(CBSIn Folder) Velocity: AML Screening functional Area Screening service
Screening service If Suspect found If Suspect found In Blocked Messages
(BlockIn Folder) Out Blocked messages (BlockOut Folder) Yes No NO Yes Create
Alert Create Alert CBS Swift Server Incoming workflow Out going workflow AFT
Service Fig: Workflow of SWIFT Page 86 of 138 10.9 ROLE OF MERCANTILE BANK IN
PREVENTING TF & PF Mercantile Bank
shall establish a procedure with the approval of Board of Directors for
detectionØ and
prevention of financing of terrorism and financing in proliferation of weapons
of mass destruction. MBL also issue instructions about the duties of Bank
officials, review those instruction time to time and ensure that they are
complying with the instructions issued by BFIU. Branch should take necessary measures, with
appropriate caution and responsibility, to preventØ and identify financial
transactions through which it is connected to any offence under ATA, 2009 and
if any suspicious transaction is identified, MBL shall spontaneously report it
to Bangladesh Bank without any delay. If
any news of activities of financing of terrorism and financing of proliferation
of weapons ofØ mass
destruction are published in any mass media, branch has to send the details of
the accounts (if any is found with them) of any persons who are engaged in
those activities to AMLD, Head Office and AMLD will report to BFIU immediately.
Branch is maintaining and update the
listed individuals and entities in electronic form andØ regularly run a check at the
website of United Nations for updated list. Branch should run regular check on
the given parameters, including transactional review, to verify whether
individuals or entities listed by the respective UNSCR Committee are holding
any funds, financial assets or economic resources or related services or having
any form of relationship with them. Branch should run a check on the given
parameters, including transactional review, to verifyØ whether individuals or entities
listed or scheduled under the ATA, 2009; individuals or entities owned or
controlled directly or indirectly by such persons or entities, as well as
persons and entities acting on behalf of, or at the direction of, individuals
or entities listed or scheduled under the Act are holding any funds, financial
assets or economic resources or related services or having any form of
relationship with them. Page 87 of 138 10.10 FLOW-CHART FOR IMPLEMENTATION OF
TFS BY BANK Page 86 of 138 RISK REGISTER 1. ML & TF Risk Register for
Customers Annexure- A Risk Likelihood Impact Risk Score Treatment/Action Retail
Banking Customer A new customer Likely Moderate =2(Medium) CDD must be ensured
& EDD should be applied. Check Standard ID (NID/Birth Registration
Certificate along with recent photo ID/Valid passport(if any) acceptable
document to the Bank. Monitoring the transaction. Response: Acceptable Risk
Walk-in customer (beneficiary is government/semi government/ autonomous body/
bank & NBFI) Likely Minor =1(Low) CDD should be ensured. Short KYC should be
obtained. Check Standard ID(NID/Birth Registration Certificate along with
recent photo ID/Valid passport(if any) acceptable document to the Bank.
Response: Acceptable Risk Walk-in customer ( beneficiary is other than
government/ semi government/ autonomous body/ bank & NBFI ) Likely Moderate
=2(Medium) CDD should be ensured. Short KYC should be obtained. Check Standard
ID(NID/Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank. Response: Acceptable Risk
Non-resident customer (Bangladeshi) Likely Moderate =2(Medium) CDD must be
ensured & EDD should be applied. Check Standard ID(NID/Birth Registration
Certificate along with recent photo ID/Valid passport(if any) acceptable
document to the Bank. Monitoring the transaction. Response: Acceptable Risk A
new customer who wants to carry out a large transaction (i.e. transaction above
CTR threshold or below the threshold) Likely Moderate =2(Medium) Check Standard
ID(NID/Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank CDD should be ensured &
EDD must be applied. Monitor the transaction. Marked as STR Response:
Acceptable Risk Page 87 of 138 Risk Likelihood Impact Risk Score
Treatment/Action A customer making series of transactions to the same
individual or entity Likely Moderate =2(Medium) CDD must be ensured & EDD
should be applied. Monitor the transaction. Marked as STR Response: Acceptable
Risk A customer or a group of customer making lots of transactions to the same
individual or group likely Moderate =2(Medium) Check Standard ID(NID/Birth
Registration Certificate along with recent photo ID/Valid passport(if any)
acceptable document to the Bank CDD should be ensured & EDD must be applied
Check Additional ID (valid driving license, Credit Card-if any, Employer’s
Certificate-in case of employee, Utility Bill, Trade license, TIN and any other
document that satisfy identification for the Bank Monitor the transaction.
Report as STR Cus Response: Acceptable Risk. tomer involved in outsourcing
business likely Moderate =2(Medium) Check Standard ID(NID/Birth Registration
Certificate along with recent photo ID/Valid passport(if any) acceptable
document to the Bank CDD should be ensured & EDD must be applied Check
Additional ID (valid driving license, Credit Card-if any, Employer’s
Certificate-in case of employee, Utility Bill, Trade license, TIN and any other
document that satisfy identification for the Bank Monitor the transaction.
Response: Acceptable Risk. Page 88 of 138 Risk Likelihood Impact Risk Score
Treatment/Action Customer appears to do structuring to avoid reporting
threshold Likely Major =3(High) Check Standard ID(NID/Birth Registration
Certificate along with recent photo ID/Valid passport(if any) acceptable
document to the Bank CDD must be ensured & EDD should be applied Check
Additional ID (valid driving license, Credit Card-if any, Employer’s
Certificate-in case of employee, Utility Bill, Trade license, TIN and any other
document that satisfy identification for the Bank Transaction is not allowed
until risk is reduced Monitor the transaction. Report as STR Response:
Unacceptable Risk. Customer appears to have accounts with several banks in the
same area likely Moderate =2(Medium) Check Standard ID(NID/Birth Registration
Certificate along with recent photo ID/Valid passport(if any) acceptable
document to the Bank CDD must be ensured & EDD should be applied. Monitor
the transaction. Marked as STR Response: Acceptable Risk Customer who shows
curiosity about internal systems, controls and policies on internal and
regulatory reporting Likely Major =3(High) Check Standard ID(NID/Birth
Registration Certificate along with recent photo ID/Valid passport(if any)
acceptable document to the Bank CDD must be ensured & EDD should be applied
Check Additional ID (valid driving license, Credit Card-if any, Employer’s
Certificate-in case of employee, Utility Bill, Trade license, TIN and any other
document that satisfy identification for the Bank Transaction is not allowed
until risk is reduced Monitor the transaction. Report as STR Response:
Unacceptable Risk. Page 89 of 138 Risk Likelihood Impact Risk Score
Treatment/Action Customer is the subject of a Money Laundering or Financing of
Terrorism investigation by the order of the court Likely Major =3(High) Check
Standard ID(NID/Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank CDD must be ensured & EDD
should be applied Check Additional ID (valid driving license, Credit Card-if
any, Employer’s Certificate-in case of employee, Utility Bill, Trade license,
TIN and any other document that satisfy identification for the Bank Transaction
is not allowed until risk is reduced Monitor the transaction. Report as STR Response:
Unacceptable Risk.. Negative news about the customers’ activities/ business in
media or from other reliable sources Likely Major =3(High) Check Standard
ID(NID/Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank CDD must be ensured & EDD
should be applied Check Additional ID (valid driving license, Credit Card-if
any, Employer’s Certificate-in case of employee, Utility Bill, Trade license,
TIN and any other document that satisfy identification for the Bank Transaction
is not allowed until risk is reduced Monitor the transaction. Report as STR
Response: Unacceptable Risk.. Customer is secretive and reluctant to meet in
person Likely Major =3(High) Check Standard ID(NID/Birth Registration Certificate
along with recent photo ID/Valid passport(if any) acceptable document to the
Bank CDD must be ensured & EDD should be applied. Transaction is not
allowed until risk is reduced Monitor the transaction. Verify physically.
Response: Unacceptable Risk. Page 90 of 138 Risk Likelihood Impact Risk Score
Treatment/Action Customer is a mandate who is operating account on behalf of
another person/ company. Likely Major =3(High) Check Standard ID(NID/Birth
Registration Certificate along with recent photo ID/Valid passport(if any)
acceptable document to the Bank CDD must be ensured & EDD should be applied
Check Additional ID (valid driving license, Credit Card-if any, Employer’s
Certificate-in case of employee, Utility Bill, Trade license, TIN and any other
document that satisfy identification for the Bank Transaction is not allowed
until risk is reduced Monitor the transaction. Report as STR Response:
Unacceptable Risk. Transactions by beneficiaries using Student account &
Farmers account Likely Moderate =2(Medium) Check Standard ID(NID/Birth
Registration Certificate along with recent photo ID/Valid passport(if any)
acceptable document to the Bank CDD must be ensured & EDD should be
applied. Obtain/check documents of beneficial owner. Monitor the transaction.
Report as STR Response: Acceptable Risk Joint account opened with minor/ women
& transactions to the account Likely Moderate =2(Medium) Check Standard
ID(NID/Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank CDD must be ensured & EDD
should be applied. Check Additional ID (valid driving license, Credit Card-if
any, Employer’s Certificate-in case of employee, Utility Bill, Trade license,
TIN and any other document that satisfy identification for the Bank Monitor the
transaction. Report as STR Response: Acceptable Risk Page 91 of 138 Risk
Likelihood Impact Risk Score Treatment/Action Large deposits in the account of
customer with low income Likely Major =3(High) Check Standard ID(NID/Birth
Registration Certificate along with recent photo ID/Valid passport(if any)
acceptable document to the Bank CDD must be ensured & EDD should be applied
Check Additional ID (valid driving license, Credit Card-if any, Employer’s
Certificate-in case of employee, Utility Bill, Trade license, TIN and any other
document that satisfy identification for the Bank Transaction is not allowed
until risk is reduced Monitor the transaction. Report as STR Response:
Unacceptable Risk. Transaction does not match with business profile Likely
Moderate =2(Medium) Check Standard ID(NID/Birth Registration Certificate along
with recent photo ID/Valid passport(if any) acceptable document to the Bank CDD
must be ensured & EDD should be applied. Check Additional ID (valid driving
license, Credit Card-if any, Employer’s Certificate-in case of employee,
Utility Bill, Trade license, TIN and any other document that satisfy
identification for the Bank Monitor the transaction. Report as STR Response:
Acceptable Risk Customers about whom BFIU seeks information (individual) Likely
Moderate =2(Medium) Check Standard ID(NID/Birth Registration Certificate along
with recent photo ID/Valid passport(if any) acceptable document to the Bank CDD
must be ensured & EDD should be applied. Check Additional ID (valid driving
license, Credit Card-if any, Employer’s Certificate-in case of employee,
Utility Bill, Trade license, TIN and any other document that satisfy
identification for the Bank Monitor the transaction. Report as STR Response:
Acceptable Risk A customer whose identification is difficult to check Very
Likely Major =4(Extreme) Do not accept as customer Response: Unacceptable Risk
Page 92 of 138 Risk Likelihood Impact Risk Score Treatment/Action Significant
and unexplained geographic distance between the bank and the location of the
customer Likely Major =3(High) Check Standard ID(NID/Birth Registration
Certificate along with recent photo ID/Valid passport(if any) acceptable
document to the Bank CDD must be ensured & EDD should be applied Check
Additional ID (valid driving license, Credit Card-if any, Employer’s
Certificate-in case of employee, Utility Bill, Trade license, TIN and any other
document that satisfy identification for the Bank Transaction is not allowed
until risk is reduced Monitor the transaction. Response: Unacceptable Risk.
Account Opening branch is far from residential address of account holder Likely
Moderate =2(Medium) Check Standard ID(NID/Birth Registration Certificate along
with recent photo ID/Valid passport(if any) acceptable document to the Bank CDD
must be ensured & EDD should be applied. Monitor the transaction. Verify
physically. Encourage to opening the account to the nearest branch. Response:
Acceptable Risk Customer is a foreigner Likely Major =3(High) Obtain approval
from Head Office. Check Standard ID(NID/Birth Registration Certificate along
with recent photo ID/Valid passport(if any) acceptable document to the Bank CDD
must be ensured & EDD should be applied Check Additional ID (valid driving
license, Credit Card-if any, Employer’s Certificate-in case of employee,
Utility Bill, Trade license, TIN and any other document that satisfy
identification for the Bank Transaction is not allowed until risk is reduced
Monitor the transaction. Response: Unacceptable Risk. Page 93 of 138 Risk Likelihood
Impact Risk Score Treatment/Action Non Resident Customer Likely Major =3(High)
Check Standard ID(NID/Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank CDD must be ensured
& EDD should be applied Check Additional ID (valid driving license, Credit
Card-if any, Employer’s Certificate-in case of employee, Utility Bill, Trade
license, TIN and any other document that satisfy identification for the Bank
Transaction is not allowed until risk is reduced Monitor the transaction.
Response: Unacceptable Risk. Customer is a minor Likely Major =3(High)
Beneficiary Owner information must be obtained. Verify the source of income.
CDD must be ensured & EDD should be applied. Transaction is not allowed until
risk is reduced Monitor the transaction Response: Unacceptable Risk. Customer
is Housewife Likely Major =3(High) Beneficiary Owner information must be
obtained. Verify the source of income. CDD should be ensured & EDD must be
applied. Transaction is not allowed until risk is reduced Monitor the
transaction Report as STR Response: Unacceptable Risk. Customers that are
politically exposed persons(PEPs) or influential persons (IPs) or chief/senior
officials of international organizations and their family members and close
associates Likely Major =3(High) Check Standard ID(NID/Birth Registration
Certificate along with recent photo ID/Valid passport(if any) acceptable
document to the Bank CDD must be ensured & EDD should be applied. Check
Additional ID (valid driving license, Credit Card-if any, Employer’s
Certificate-in case of employee, Utility Bill, Trade license, TIN and any other
document that satisfy identification for the Bank Transaction is not allowed
until risk is reduced Monitor the transaction. Response: Unacceptable Risk.
Page 94 of 138 Risk Likelihood Impact Risk Score Treatment/Action Customer
opens account in the name of his/her family member who intends to credit large
amount of deposits Very likely Moderate =3(high) Check Standard ID(NID/Birth
Registration Certificate along with recent photo ID/Valid passport(if any)
acceptable document to the Bank CDD must be ensured & EDD should be applied
Check Additional ID (valid driving license, Credit Card-if any, Employer’s
Certificate-in case of employee, Utility Bill, Trade license, TIN and any other
document that satisfy identification for the Bank Transaction is not allowed
until risk is reduced Monitor the transaction. Response: Unacceptable Risk.
Customers doing significant volume of transactions with higher - risk
geographic locations. Very likely Moderate =3(high) Check Standard ID(
NID/Birth Registration Certificate along with recent photo ID/Valid passport(if
any) acceptable document to the Bank CDD must be ensured & EDD should be
applied Check Additional ID (valid driving license, Credit Card-if any,
Employer’s Certificate-in case of employee, Utility Bill, Trade license, TIN
and any other document that satisfy identification for the Bank Transaction is
not allowed until risk is reduced Monitor the transaction. Report as STR
Response: Unacceptable Risk. A customer who brings in large amounts of used
notes and/or small denominations Likely Moderate =2(Medium) Check Standard
ID(NID/Birth Registration Certificate along with recent photo ID/Valid passport(if
any) acceptable document to the Bank CDD must be ensured & EDD should be
applied Response: Acceptable Risk Page 95 of 138 Risk Likelihood Impact Risk
Score Treatment/Action Customer dealing in high value or precious goods (e.g.
jewel, gem and precious metals dealers, art and antique dealers and auction
houses, estate agents and real estate brokers) Likely Major =3(High) Check
Standard ID(NID/Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank Report as STR. CDD must be
ensured & EDD should be applied. Check Additional ID (valid driving
license, Credit Card-if any, Employer’s Certificate-in case of employee,
Utility Bill, Trade license, TIN and any other document that satisfy identification
for the Bank Transaction is not allowed until risk is reduced Monitoring the
Transaction regularly. Response: Unacceptable Risk. Customer is a money
changer/ courier service agent / travel agent Likely Major =3(High) Check
Standard ID(NID/Birth Registration Certificate along with recent photo ID/Valid
passport(if any)/ acceptable document to the Bank CDD must be ensured & EDD
should be applied. Check Additional ID (valid driving license, Credit Card-if
any, Employer’s Certificate-in case of employee, Utility Bill, Trade license,
TIN and any other document that satisfy identification for the Bank Transaction
is not allowed until risk is reduced Monitoring the Transaction regularly.
Response: Unacceptable Risk. Customer is involved in business defined as high
risk in KYC profile by BFIU, but not mentioned above Likely Major =3(High)
Check Standard ID(NID/Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank CDD must be ensured
& EDD should be applied. Check Additional ID (valid driving license, Credit
Card-if any, Employer’s Certificate-in case of employee, Utility Bill, Trade
license, TIN and any other document that satisfy identification for the Bank
Transaction is not allowed until risk is reduced Transaction Monitoring
regularly. Response: Unacceptable Risk. Page 96 of 138 Risk Likelihood Impact
Risk Score Treatment/Action Customer is involved in Manpower Export Business
Likely Major =3(High) Check Standard ID(NID/Birth Registration Certificate along
with recent photo ID/Valid passport(if any) acceptable document to the Bank CDD
must be ensured & EDD should be applied. Check Additional ID (valid driving
license, Credit Card-if any, Employer’s Certificate-in case of employee,
Utility Bill, Trade license, TIN and any other document that satisfy
identification for the Bank Transaction is not allowed until risk is reduced
Monitoring Transaction. Report as STR. Response: Unacceptable Risk. Customer
has been refused to provide banking facilities by another bank Likely Major
=3(High) Identify the reason behind non acceptance by other Banks. Check
Standard ID(NID/Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank CDD must be ensured & EDD
should be applied. Check Additional ID (valid driving license, Credit Card-if
any, Employer’s Certificate-in case of employee, Utility Bill, Trade license,
TIN and any other document that satisfy identification for the Bank Transaction
is not allowed until risk is reduced Monitoring the Transaction regularly.
Response: Unacceptable Risk. Accounts opened before 30 April, 2002 Likely
Moderate =2(Medium) Update KYC profile Marked as dormant if KYC is not updated.
Check Standard ID( NID/Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank CDD must be ensured
& EDD should be applied Monitor the transaction. Response: Acceptable Risk
Page 97 of 138 Risk Likelihood Impact Risk Score Treatment/Action Customers with
complex accounting and huge transaction Likely Major =3(High) Check Standard
ID(NID/Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank CDD must be ensured & EDD
should be applied. Transaction is not allowed until risk is reduced Monitoring
the Transaction regularly. Response: Unacceptable Risk. Receipt of donor fund ,
fund from foreign source by micro finance institute (MFI) Likely Major =3(High)
CDD must be ensured & EDD should be applied. Transaction is not allowed
until risk is reduced Monitoring the Transaction regularly. Verify source of
fund. Response: Unacceptable Risk. Customer which is a reporting organization
under MLP Act 2012 appears not complying with the reporting requirements (MFI) as
per reliable source Likely Major =3(High) Check Standard ID(NID/Birth
Registration Certificate along with recent photo ID/Valid passport(if any)
acceptable document to the Bank CDD must be ensured & EDD should be
applied. Check Additional ID (valid driving license, Credit Card-if any,
Employer’s Certificate-in case of employee, Utility Bill, Trade license, TIN
and any other document that satisfy identification for the Bank Transaction is
not allowed until risk is reduced Monitoring the Transaction regularly.
Response: Unacceptable Risk. Genuineness of submitted documents is difficult to
ensure Likely Moderate =2(Medium) Check Standard ID(NID/Birth Registration
Certificate along with recent photo ID/Valid passport(if any) acceptable
document to the Bank CDD must be ensured & EDD should be applied. Monitor
the transaction Verify physically. Response: Acceptable Risk Page 98 of 138
Risk Likelihood Impact Risk Score Treatment/Action Counterfeiting of security
documents Likely Major =3(High) Check Standard ID(NID/Birth Registration
Certificate along with recent photo ID/Valid passport(if any) acceptable
document to the Bank CDD must be ensured & EDD should be applied. Check
Additional ID (valid driving license, Credit Card-if any, Employer’s
Certificate-in case of employee, Utility Bill, Trade license, TIN and any other
document that satisfy identification for the Bank Transaction is not allowed
until risk is reduced Report as STR Response: Unacceptable Risk. High net worth
with no clear identifiable sources of income Likely Major =3(High) Check
Standard ID(NID/Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank CDD must be ensured & EDD
should be applied Check Additional ID (valid driving license, Credit Card-if
any, Employer’s Certificate-in case of employee, Utility Bill, Trade license,
TIN and any other document that satisfy identification for the Bank.
Transaction is not allowed until risk is reduced Monitor the transaction
regularly Response: Unacceptable Risk. Customer has been refused to provide
banking facilities by another Bank Likely Moderate =2(Medium) Check Standard
ID(NID/Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank CDD must be ensured & EDD
should be applied Check Additional ID (valid driving license, Credit Card-if
any, Employer’s Certificate-in case of employee, Utility Bill, Trade license,
TIN and any other document that satisfy identification for the Bank. Monitor
the transaction regularly Response: Acceptable Risk Page 99 of 138 Risk
Likelihood Impact Risk Score Treatment/Action Accounts of SME, NGOs, Trusts,
Charity, Co-operative Societies, MLM Co etc. Likely Major =3(High) Check
Standard ID(NID/Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank CDD must be ensured & EDD
must be applied Check Additional ID (valid driving license, Credit Card-if any,
Employer’s Certificate-in case of employee, Utility Bill, Trade license, TIN
and any other document that satisfy identification for the Bank. Transaction is
not allowed until risk is reduced Monitor the transaction regularly Response:
Unacceptable Risk. A corporate customer whose ownership structure is unusual
and excessively complex Very likely Major =4(Extreme) Do not accept as customer
Response: Unacceptable Risk Anonymous account transactions Very likely Major
=4(Extreme) Do not accept as customer Response: Unacceptable Risk Wholesale
Banking Customer Entity customer having operations in multiple locations Likely
Moderate =2(Medium) Check Standard ID(NID/Birth Registration Certificate along
with recent photo ID/Valid passport(if any) acceptable document to the Bank CDD
must be ensured & EDD should be applied. Monitor the transaction. Verify
physically. Encourage to opening the account to the nearest branch. Response:
Acceptable Risk Customers about whom BFIU seeks information (large corporate)
Likely Major =3(High) Check Standard ID(NID/Birth Registration Certificate along
with recent photo ID/Valid passport(if any) acceptable document to the Bank
Report as STR CDD must be ensured & EDD must be applied. Check Additional
ID (valid driving license, Credit Card-if any, Employer’s Certificate-in case
of employee, Utility Bill, Trade license, TIN and any other document that
satisfy identification for the Bank Transaction is not allowed until risk is
reduced Monitoring the Transaction regularly. Response: Unacceptable Risk. Page
100 of 138 Risk Likelihood Impact Risk Score Treatment/Action Owner of the
entity that are Influential Persons (IPs) and their family members and close
associates Likely Major =3(High) Obtain senior management approval before
establishing such business relationship. Transaction is not allowed until risk
is reduced Verify source of fund. Report as STR CDD must be ensured & EDD
must be applied. Monitor the Transaction. Response: Unacceptable Risk. A new
customer who wants to carry out a large transaction. (i.e. transaction
amounting 10 million or above) Likely Major =3(High) Check Standard
ID(NID/Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank CDD must be ensured & EDD
should be applied. Check Additional ID (valid driving license, Credit Card-if
any, Employer’s Certificate-in case of employee, Utility Bill, Trade license,
TIN and any other document that satisfy identification for the Bank Transaction
is not allowed until risk is reduced Monitoring the Transaction regularly..
Response: Unacceptable Risk. A customer or a group of customers making lots of
transactions to the same individual or group (wholesale). Likely Major =3(High)
Check Standard ID(NID/Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank CDD must be ensured
& EDD should be applied. Check Additional ID (valid driving license, Credit
Card-if any, Employer’s Certificate-in case of employee, Utility Bill, Trade
license, TIN and any other document that satisfy identification for the Bank
Transaction is not allowed until risk is reduced Monitoring the Transaction
regularly. Report as STR Response: Unacceptable Risk. A customer whose
identification is difficult to check. Very Likely Major =4(Extreme) Do not
accept as customer Response: Unacceptable Risk Page 101 of 138 Risk Likelihood
Impact Risk Score Treatment/Action Owner of the entity that are Politically
Exposed Persons (PEPs) or Influential Persons (IPs)/ chief / senior officials
of International Organizations and their family members and close associates
Likely Major =3(High) Obtain senior management approval before establishing
such business relationship. Verify source of fund. Report as STR CDD must be
ensured & EDD must be applied. Transaction is not allowed until risk is
reduced Monitor the Transaction. Response: Unacceptable Risk. Charities or
NPOs(especially operating in less privileged areas). Likely Major =3(High)
Check Standard ID(NID/Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank CDD must be ensured
& EDD must be applied. Check Additional ID (valid driving license, Credit
Card-if any, Employer’s Certificate-in case of employee, Utility Bill, Trade
license, TIN and any other document that satisfy identification for the Bank
Transaction is not allowed until risk is reduced Monitoring the Transaction
regularly. Response: Unacceptable Risk. Credit Card Customer Customer who
changes static data frequently Likely Major =3(High) Check Standard ID( NID/
Birth Registration Certificate along with recent photo ID/Valid passport(if
any) acceptable document to the Bank CDD must be ensured & EDD should be
applied Check Additional ID (valid driving license, Credit Card-if any,
Employer’s Certificate-in case of employee, Utility Bill, Trade license, TIN
and any other document that satisfy identification for the Bank Transaction is
not allowed until risk is reduced Response: Unacceptable Risk. Page 102 of 138
Risk Likelihood Impact Risk Score Treatment/Action Credit Card customer Likely
Major =3(High) Check Standard ID(NID/ Birth Registration Certificate along with
recent photo ID/Valid passport(if any) acceptable document to the Bank CDD must
be ensured & EDD should be applied Check Additional ID (valid driving license,
Credit Card-if any, Employer’s Certificate-in case of employee, Utility Bill,
Trade license, TIN and any other document that satisfy identification for the
Bank Transaction is not allowed until risk is reduced Response: Unacceptable
Risk. Customer doing frequent transaction through card (Prepaid & Credit
card) and making quick adjustments Likely Moderate =2(Medium) Check Standard
ID(NID/Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank CDD must be ensured & EDD
should be applied Check Additional ID (valid driving license, Credit Card-if
any, Employer’s Certificate-in case of employee, Utility Bill, Trade license,
TIN and any other document that satisfy identification for the Bank Response:
Acceptable Risk Prepaid Card customer Likely Minor =1(Low) Check Standard
ID(NID/Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank CDD should be ensured &
EDD should be applied. Monitor transaction. Response: Acceptable Risk Page 103
of 138 International Trade Customer A new customer (Outward remittance-through
SWIFT) Likely Moderate =2(Medium) CDD must be ensured & EDD should be
applied. Check Standard ID(NID/Birth Registration Certificate along with recent
photo ID/Valid passport(if any) acceptable document to the Bank Monitor the
transaction. To check the name of the beneficiary in the sanctioned list Marked
as STR if the customer not provide the required documents Obtain the
information regarding purpose of remittance. Response: Acceptable Risk A new
customer (Import/ Export) Likely Moderate =2(Medium) CDD must be ensured &
EDD should be applied. Check Standard ID (NID/ Birth Registration Certificate
along with recent photo ID/Valid passport(if any) acceptable document to the
Bank To check the name of the beneficiary / applicant in the sanctioned list
Monitor the transaction. Valid IRC & ERC should be obtained. Response:
Acceptable Risk A new customer (Inward remittance-through SWIFT ) Likely Moderate
=2(Medium) CDD must be ensured & EDD should be applied. Check Standard ID
(NID/ Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank To check the name of the
remitter in the sanctioned list Monitor the transaction. Marked as STR if the
customer not provide the required documents Response: Acceptable Risk A new
customer who wants to carry out a large transaction (Import/ Export) Likely
Moderate =2(Medium) CDD must be ensured & EDD should be applied. Check
Standard ID (NID/ Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank To check the name of
the beneficiary / applicant in the sanctioned list Monitor the transaction.
Valid IRC & ERC should be obtained. Response: Acceptable Risk Page 104 of
138 A new customer who wants to carry out a large transaction (Inward/ outward
remittance) Likely Major =3(High) CDD must be ensured & EDD should be
applied. Check Standard ID (NID/ Birth Registration Certificate along with
recent photo ID/Valid passport(if any) acceptable document to the Bank To check
the name of the beneficiary / remitter in the sanctioned list Monitor the
transaction. Report as STR if the customer not provide the required documents Transaction
is not allowed until risk is reduced Response: Unacceptable Risk. A customer
wants to conduct business beyond its line of business (import/ export/
remittance) Likely Major =3(High) CDD must be ensured & EDD must be
applied. Check Standard ID (NID/ Birth Registration Certificate along with
recent photo ID/Valid passport(if any) acceptable document to the Bank Monitor
the transaction. IRC & ERC should be obtained. Report as STR if the
customer not provide the required documents Transaction is not allowed until
risk is reduced Response: Unacceptable Risk. Owner/ director/ shareholder of
the customer is influential person(s) or their family members or close
associates Likely Major =3(High) Obtain senior management approval before
establishing such business relationship. CDD must be ensured & EDD must be
applied. Check Standard ID (NID/ Birth Registration Certificate along with
recent photo ID/Valid passport(if any) acceptable document to the Bank Verify
source of fund. Monitor the transaction. Transaction is not allowed until risk
is reduced Report as STR Response: Unacceptable Risk. Page 105 of 138
Correspondent Banks Likely Moderate =2(Medium) To be satisfied about the nature
of the business of the correspondent through collection of information. Obtain
senior management approval before establishing correspondent relationship. No
relation with Shell Bank. CDD must be ensured & EDD must be applied before
establishing correspondent banking relationship with banks incorporated in a
jurisdiction that do not meet or have significant deficiencies in complying
international standard for the prevention of Money Laundering & Terrorist
Financing. Obtain the extensive information about their policies &
procedures on prevention of Money Laundering & Terrorist Financing.
Response: Acceptable Risk Money services businesses (remittance houses,
exchange houses) Likely Moderate =2(Medium) To be satisfied about the nature of
the business of the correspondent through collection of information. Obtain
senior management as well as Bangladesh Bank approval before establishing
Agency arrangement No relation with Shell Bank. CDD must be ensured & EDD
must be applied before establishing Agency arrangement with banks incorporated
in a jurisdiction that do not meet or have significant deficiencies in
complying international standard for the prevention of Money Laundering &
Terrorist Financing. Obtain the extensive information about their policies
& procedures on prevention of Money Laundering & Terrorist Financing. Response:
Acceptable Risk Page 106 of 138 2. Risk Register for Products & Services
(All the products and services of a bank has to be included here) R i s k
Likelihood Impact Risk Score Treatment/Action Retail Banking Product Accounts
for students where large amount of transactions are made (student file) Likely
Major =3(High) Obtain information of Beneficiary Owner. Verify source of
income. CDD must be ensured & EDD must be applied. Check Standard ID (NID/
Birth Registration Certificate along with recent photo ID/Valid passport(if
any) acceptable document to the Bank Monitor the transaction. Transaction is
not allowed until risk is reduced Report as STR Response: Unacceptable Risk.
Gift Cheque Likely Minor =1(Low) Check Standard ID(NID/passport/, Birth
Registration Certificate along with recent photo ID/Valid passport(if any)
acceptable document to the Bank CDD should be ensured & EDD should be
applied. Obtain information of Beneficiary before payment Response: Acceptable
Risk Locker Service Likely Moderate =2(Medium) CDD must be ensured & EDD
should be applied. Check Standard ID (NID/ Birth Registration Certificate along
with recent photo ID/Valid passport(if any) acceptable document to the Bank
Response: Acceptable Risk Foreign currency endorsement in Passport Likely Minor
=1(Low) The customer should be account holder or relative of account holder.
Check Standard ID(NID/ Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank CDD should be ensured
& EDD should be applied. Response: Acceptable Risk Page 107 of 138 Large
transaction in the account of under privileged people Likely Major =3(High)
Verify source of income. CDD mustbe ensured & EDD must be applied. Check
Standard ID (NID/ Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank Monitor the
transaction. Marked as STR Transaction is not allowed until risk is reduced
Response: Unacceptable Risk. FDR ( less than 2 million) Likely Moderate
=2(Medium) CDD must be ensured & EDD should be applied. Check Standard ID
(NID/Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank Verify the source of fund
Response: Acceptable Risk FDR (2 million and above) Likely Major =3(High)
Verify the source of fund. CDD must be ensured & EDD should be applied.
Check Standard ID (NID/ Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank Transaction is not
allowed until risk is reduced Report as STR Response: Unacceptable Risk.
Special scheme deposit accounts opened with big installment and small tenure
Likely Moderate =2(Medium) Verify the source of fund. CDD should be ensured
Check Standard ID (NID/ Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank Monitor the
transaction. Report as STR Response: Acceptable Risk Multiple deposit scheme
accounts opened by same customer in a branch Likely Moderate =2(Medium) Verify
the source of fund. CDD should be ensured Check Standard ID (NID/ Birth
Registration Certificate along with recent photo ID/Valid passport(if any)
acceptable document to the Bank Monitor the transaction. Report as STR
Response: Acceptable Risk Page 108 of 138 Multiple deposit scheme accounts
opened by same customer from different location Likely Major =3(High) Verify
the source of fund. CDD must be ensured & EDD should be applied. Check
Standard ID (NID/ Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank Transaction is not
allowed until risk is reduced. Marked as STR Response: Unacceptable Risk. Open
DPS in the name of family member Or Installments paid from the account other
than the customer’s account Likely Major =3(High) Obtain the information of
Beneficiary Owner. Verify the source of fund. CDD must be ensured & EDD
should be applied. Check Standard ID (NID/ Birth Registration Certificate along
with recent photo ID/Valid passport(if any) acceptable document to the Bank
Monitor the transaction. Transaction is not allowed until risk is reduced
Report as STR Response: Unacceptable Risk. Stand alone DPS Likely Moderate
=2(Medium) CDD should be ensured Check Standard ID (NID/ Birth Registration
Certificate along with recent photo ID/Valid passport(if any) acceptable
document to the Bank Response: Acceptable Risk Early encashment of FDR, special
scheme etc. Likely Moderate =2(Medium) CDD must be ensured & EDD should be
applied. Check Standard ID (NID/ Birth Registration Certificate along with
recent photo ID/Valid passport(if any) acceptable document to the Bank
Response: Acceptable Risk Non face to face business relationship/transaction
Very Likely Major =4(Extreme) Do not accept business relationship. Response:
Unacceptable Risk Payment received from unrelated/un-associated third parties
Likely Major =3(High) CDD must be ensured & EDD must be applied. Check
Standard ID (NID/ Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank Verify the source of
fund Transaction is not allowed until risk is reduced Monitor the transaction.
Response: Unacceptable Risk. Page 109 of 138 Retail Privilege Facilities Pre-
Approved Credit Card with BDT 300K limit Likely Major =3(High) CDD must be
ensured & EDD must be applied. Check Standard ID (NID/ Birth Registration
Certificate along with recent photo ID/Valid passport(if any) acceptable
document to the Bank Monitor the transaction. Transaction is not allowed until
risk is reduced Response: Unacceptable Risk. Enhanced ATM cash withdrawal Limit
BDT 100K Likely Moderate =2(Medium) CDD should be ensured & EDD must be
applied. Check Standard ID (NID/ Birth Registration Certificate along with
recent photo ID/Valid passport(if any) acceptable document to the Bank Monitor
the transaction. Response: Acceptable Risk SME Banking Product Want to open FDR
where source of fund is not clear Likely Major =3(High) Verify the source of
fund. CDD must be ensured & EDD must be applied. Check Standard ID (NID/
Birth Registration Certificate along with recent photo ID/Valid passport(if
any) acceptable document to the Bank Transaction is not allowed until risk is
reduced Report as STR Response: Unacceptable Risk. Early encashment of FDR
Likely Minor =1(Low) Check Standard ID(NID/ Birth Registration Certificate
along with recent photo ID/Valid passport(if any) acceptable document to the
Bank CDD should be ensured Response: Acceptable Risk Repayment of loan EMI from
source that is not clear Likely Major =3(High) CDD must be ensured & EDD
should be applied. Check Standard ID (NID/ Birth Registration Certificate along
with recent photo ID/Valid passport(if any) acceptable document to the Bank
Transaction is not allowed until risk is reduced Report as STR Response:
Unacceptable Risk. Page 110 of 138 Repayment of full loan amount before
maturity Likely Major =3(High) CDD must be ensured & EDD must be applied.
Check Standard ID (NID/ Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank Verify the source of fund
Transaction is not allowed until risk is reduced Response: Unacceptable Risk
Loan amount utilized in sector other than the sector specified during availing
the loan Likely Major =3(High) Monitor the transaction. CDD must be ensured
& EDD must be applied. Check Standard ID (NID/ Birth Registration
Certificate along with recent photo ID/Valid passport(if any) acceptable
document to the Bank. Report as STR Transaction is not allowed until risk is
reduced Response: Unacceptable Risk. In case of fixed asset financing, sale of
asset purchased immediately after repayment of full loan amount Likely Major
=3(High) Monitor the transaction. CDD must be ensured & EDD must be applied.
Check Standard ID (NID/ Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank Response:
Unacceptable Risk. Source of fund used as security not clear at the time of
availing loan Likely Major =3(High) Monitor the transaction. CDD must be
ensured & EDD must be applied. Check Standard ID (NID/ Birth Registration
Certificate along with recent photo ID/Valid passport(if any) acceptable
document to the Bank Transaction is not allowed until risk is reduced Report as
STR Response: Unacceptable Risk. Wholesale Banking Product Development of new
product & service of bank Likely Moderate =2(Medium) CDD should be ensured
& EDD should be applied. Check Standard ID (NID/ Birth Registration
Certificate along with recent photo ID/Valid passport(if any) acceptable
document to the Bank Monitor the transaction. Response: Acceptable Risk Page
111 of 138 Payment received from unrelated third parties Likely Major =3(High)
Transaction is not allowed until risk is reduced CDD must be ensured & EDD
must be applied. Check Standard ID (NID/ Birth Registration Certificate along
with recent photo ID/Valid passport(if any) acceptable document to the Bank
Verify the source of fund Report as STR Response: Unacceptable Risk. High Value
FDR Likely Major =3(High) Verify the source of fund. CDD must be ensured &
EDD should be applied. Check Standard ID (NID/ Birth Registration Certificate
along with recent photo ID/Valid passport(if any) acceptable document to the
Bank Transaction is not allowed until risk is reduced Response: Unacceptable
Risk. Term loan, SOD(FO), SOD(Gwork order), SOD(Garment),SOD(PO), Loan General,
Lease finance, Packing Credit, BTB L/C Likely Moderate =2(Medium) CDD must be
ensured & EDD should be applied. Check Standard ID (NID/ Birth Registration
Certificate along with recent photo ID/Valid passport(if any) acceptable
document to the Bank Monitor the transaction. Response: Acceptable Risk BG(bid
bond), BG(PG), BG(APG) Likely Moderate =2(Medium) CDD must be ensured & EDD
should be applied. Check Standard ID (NID/ Birth Registration Certificate along
with recent photo ID/Valid passport(if any) acceptable document to the Bank
Monitor the transaction. Response: Acceptable Risk L/C subsequent term loan, DP
L/C Likely Moderate =2(Medium) CDD must be ensured & EDD should be applied.
Check Standard ID (NID/ Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank Monitor the
transaction. Verify the documents Response: Acceptable Risk C.C(H),
SOD(G-Business), STL Likely Moderate =2(Medium) CDD must be ensured & EDD
should be applied. Check Standard ID (NID/ Birth Registration Certificate along
with recent photo ID/Valid passport(if any) acceptable document to the Bank Monitor
the transaction. Verify the value of mortgage property. Response: Acceptable
Risk Page 112 of 138 OBU Likely Moderate =2(Medium) CDD must be ensured &
EDD must be applied. Check Standard ID (NID/ Birth Registration Certificate
along with recent photo ID/Valid passport(if any) acceptable document to the
Bank Monitor the transaction. Response: Acceptable Risk Syndication Financing
Likely Moderate =2(Medium) CDD must be ensured & EDD must be applied. Check
Standard ID (NID/ Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank Verify the documents
Monitor the transaction. Response: Acceptable Risk Credit Card Supplementary
Credit Card Issue Likely Moderate =2(Medium) CDD must be ensured & EDD
should be applied. Check Standard ID (NID/ Birth Registration Certificate along
with recent photo ID/Valid passport(if any) acceptable document to the Bank
Monitor the transaction. Response: Acceptable Risk Frequent use of Card Cheque
Likely Moderate =2(Medium) CDD must be ensured & EDD should be applied.
Check Standard ID (NID/ Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank Monitor the
transaction. Response: Acceptable Risk BEFTN cheque or pay order as mode of
payment instead of account opening at bank (Merchant) Likely Moderate
=2(Medium) CDD must be ensured & EDD should be applied. Check Standard ID
(NID/ Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank Monitor the transaction.
Response: Acceptable Risk Page 113 of 138 Credit card issuance against ERQ and
RFCD accounts Likely Moderate =2(Medium) CDD must be ensured & EDD should
be applied. Check Standard ID (NID/ Birth Registration Certificate along with
recent photo ID/Valid passport(if any) acceptable document to the Bank Monitor
the transaction. Response: Acceptable Risk International Trade Line of business
mismatch (import/export/remittance) Likely Moderate =2(Medium) CDD must be ensured
& EDD should be applied. Check Standard ID (NID/ Birth Registration
Certificate along with recent photo ID/Valid passport(if any) acceptable
document to the Bank Monitor the transaction. Response: Acceptable Risk Under/
Over invoicing (import/export/remittance) Likely Major =3(High) Verify the
price of goods/services quoted in the invoice. Monitor the transaction. CDD
must be ensured & EDD must be applied. Transaction is not allowed until
risk is reduced Check Standard ID (NID/ Birth Registration Certificate along
with recent photo ID/Valid passport(if any) acceptable document to the Bank
Response: Unacceptable Risk. Retirement of import bills in cash
(import/export/remittance) Likely Moderate =2(Medium) Monitor the transaction.
CDD must be ensured & EDD must be applied. Check Standard ID (NID/ Birth
Registration Certificate along with recent photo ID/Valid passport(if any)
acceptable document to the Bank Response: Acceptable Risk Page 114 of 138 Wire
transfer Likely Moderate =2(Medium) CDD must be ensured & EDD should be
applied. In case of threshold cross-border wire transfer of 1000 or above USD
or equivalent foreign currency, full and accurate information of the originator
has to be collected & preserved and has to be sent to intermediary/beneficiary
bank. In case of threshold domestic wire transfer of at least 25,000 BDT, full
and accurate information of the originator has to be collected & preserved
and has to be sent to intermediary/beneficiary bank. For the domestic wire
transfers below the threshold full and meaningful originator information has to
be preserved. Check Standard ID (NID/ Birth Registration Certificate along with
recent photo ID/Valid passport(if any) acceptable document to the Bank Monitor
the transaction. Response: Acceptable Risk Remittance ( Western Union &
Others) Likely Moderate =2(Medium) Check Standard ID (NID /, Birth Registration
Certificate along with recent photo ID/ Valid passport (if any) acceptable
document to the Bank CDD must be ensured & EDD must be applied. Monitor the
transaction. Response: Acceptable Risk Relationship between the remitter and
beneficiary and purpose of remittance mismatch (outward/inward remittance)
Likely Major =3(High) Check Standard ID (NID /, Birth Registration Certificate
along with recent photo ID/Valid passport(if any) acceptable document to the
Bank Monitor the transaction. CDD must be ensured & EDD must be applied.
Transaction is not allowed until risk is reduced Response: Unacceptable Risk.
Page 115 of 138 3. Risk Register for Business practices/delivery methods or
channels R i s k Likelihood Impact Risk Score Treatment/Action Online (multiple
small transaction through different branch) Likely Major =3(High) Check
Standard ID (NID/ Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank Monitor the transaction. CDD
must be ensured & EDD should be applied. Transaction is not allowed until
risk is reduced Report as STR Response: Unacceptable Risk. BEFTN Likely
Moderate =2(Medium) Check Standard ID (NID/ Birth Registration Certificate
along with recent photo ID/Valid passport(if any) acceptable document to the
Bank Monitor the transaction. CDD should be ensured & EDD should be
applied. Response: Acceptable Risk BACH Likely Moderate =2(Medium) Check
Standard ID( NID/ Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank CDD should be ensured
& EDD should be applied Check Additional ID (valid driving license, Credit
Card-if any, Employer’s Certificate-in case of employee, Utility Bill, Trade
license, TIN and any other document that satisfy identification for the Bank
Check TP Response: Acceptable Risk IDBP Likely Moderate =2(Medium) Check
Standard ID (NID/ Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank Monitor the
transaction. CDD should be ensured & EDD should be applied. Comply with
circulars issued by Head Office from time to time Response: Acceptable Risk
Page 116 of 138 Mobile Banking Likely Moderate =2(Medium) Check Standard ID(
NID/ Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank Screening Mechanism should be
followed to appoint agent or cash point CDD must be ensured & EDD must be
applied Check Additional ID (valid driving license, Credit Card-if any,
Employer’s Certificate-in case of employee, Utility Bill, Trade license, TIN
and any other document that satisfy identification for the Bank Response: Acceptable
Risk Third party agent or broker Likely Moderate =2(Medium) Check Standard ID(
NID/ Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank Screening Mechanism should be
followed to appoint agent. CDD must be ensured & EDD must be applied
Response: Acceptable Risk Direct contact with the customerLikely Minor =1(low)
Check Standard ID( NID/ Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank CDD should be ensured
& EDD should be applied Response: Acceptable Risk Credit Card New Merchant
sign up Likely Moderate =2(Medium) Check Standard ID (NID/ Birth Registration
Certificate along with recent photo ID/Valid passport(if any) acceptable document
to the Bank Monitor the transaction. CDD must be ensured & EDD should be
applied. Response: Acceptable Risk Page 117 of 138 High volume transaction
through POS Likely Moderate =2(Medium) Check Standard ID (NID/ Birth
Registration Certificate along with recent photo ID/Valid passport(if any)
acceptable document to the Bank Monitor the transaction. CDD must be ensured
& EDD should be applied. Response: Acceptable Risk Alternate Delivery
Channel Large amount withdrawn from ATMs Likely Moderate =2(Medium) Check
Standard ID (NID/ Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank Monitor the
transaction. CDD must be ensured & EDD should be applied. Response:
Acceptable Risk Larger amount transaction from different location and different
time(mid night) through ATM Likely Moderate =2(Medium) Check Standard ID (NID/
Birth Registration Certificate along with recent photo ID/Valid passport(if
any) acceptable document to the Bank Monitor the transaction. CDD must be
ensured & EDD should be applied. Report as STR Response: Acceptable Risk
Large amount of cash deposit in CDM Likely Moderate =2(Medium) Check Standard
ID (NID/ Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank Monitor the transaction. CDD
should be ensured & EDD should be applied. Response: Acceptable Risk Huge
fund transfer through internet Likely Major =3(High) Check Standard ID (NID/
Birth Registration Certificate along with recent photo ID/Valid passport(if
any) acceptable document to the Bank Monitor the transaction. CDD must be
ensured & EDD must be applied. Transaction is not allowed until risk is
reduced Report as STR Response: Unacceptable Risk. Online/Internet Likely Moderate
=2(Medium) Check Standard ID( NID/ Birth Registration Certificate along with
recent photo ID/Valid passport(if any) acceptable document to the Bank CDD must
be ensured & EDD must be applied. Response: Acceptable Risk Page 118 of 138
Transaction Profile updated through Internet Banking Likely Moderate =2(Medium)
Check Standard ID (NID/ Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank Monitor the
transaction. CDD must be ensured & EDD should be applied. Verify customer’s
email ID. Response: Acceptable Risk Customer to business transaction-Online
Payment Gateway -Internet Banking Likely Major =3(High) Check Standard ID (NID/
Birth Registration Certificate along with recent photo ID/Valid passport(if
any) acceptable document to the Bank Monitor the transaction. CDD must be
ensured & EDD must be applied. Transaction is not allowed until risk is
reduced Response: Unacceptable Risk. International Trade Customer sending
remittance through SWIFT under single customer credit transfer (fin- 103)
Likely Moderate =2(Medium) Check Standard ID (NID/ Birth Registration
Certificate along with recent photo ID/Valid passport(if any) acceptable
document to the Bank Monitor the transaction. CDD must be ensured & EDD
should be applied. Response: Acceptable Risk Existing customer/ other bank
customer receiving remittance through SWIFT under single customer credit
transfer (fin- 103) . Likely Moderate =2(Medium) Check Standard ID (NID/ Birth
Registration Certificate along with recent photo ID/Valid passport(if any)
acceptable document to the Bank Monitor the transaction. CDD must be ensured
& EDD should be applied. Response: Acceptable Risk Page 119 of 138 4. Risk
Register for Country/jurisdiction R i s k Likelihood Impact Risk score
Treatment/Action Import and export from/to sanction country Very Likely Major
=4(Extreme) Do not accept the business relationship. Response: Unacceptable
Risk Transshipments, container, flag vessel etc. under global sanction Likely
Major =3(High) Check Standard ID (NID/ Birth Registration Certificate along
with recent photo ID/Valid passport(if any) acceptable document to the Bank
Monitor the transaction. CDD must be ensured & EDD must be applied.
Response: Unacceptable Risk. Establishing correspondent relationship with
sanction bank and/or country Very Likely Major =4(Extreme) Do not accept the
business relationship. Response: Unacceptable Risk Establishing correspondent
relationship with poor AML&CFT practice country Likely Major =3(High) Particular
attention should be paid & EDD must be applied while establishing a
correspondent banking relationship Detailed information on the beneficial
ownership of such banks shall have to be obtained. . Extensive information
about their policies and procedures on preventing money laundering and
terrorist financing shall have to be obtained. . Approval from senior
management should be obtained Transaction is not allowed until risk is reduced
Response: Unacceptable Risk. Customer belongs to higher - risk geographic
locations such as High Intensity Financial Crime Areas Likely Major =3(High)
CDD must be ensured & EDD must be applied while establishing a relationship
Check Standard ID (NID/ Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank Check Additional ID
(valid driving license, Credit Card-if any, Employer’s Certificate-in case of
employee, Utility Bill, Trade license, TIN and any other document that satisfy
identification for the Bank Approval from senior management should be obtained
Monitor the transaction Transaction is not allowed until risk is reduced Report
as STR Response: Unacceptable Risk. Page 120 of 138 Customer belongs to
countries or geographic areas identified by credible sources a providing
funding or support for terrorist activities, or that have designated terrorist
organizations operating within their country. Likely Major =3(High) CDD must be
ensured & EDD must be applied while establishing a relationship Check
Standard ID (NID/ Birth Registration Certificate along with recent photo
ID/Valid passport(if any) acceptable document to the Bank Check Additional ID
(valid driving license, Credit Card-if any, Employer’s Certificate-in case of
employee, Utility Bill, Trade license, TIN and any other document that satisfy
identification for the Bank Approval from senior management should be obtained
Transaction is not allowed until risk is reduced Monitor the transaction Report
as STR Response: Unacceptable Risk. Customer belongs to High Risk ranking
countries of the Basel AML index. Likely Major =3(High) CDD must be ensured
& EDD must be applied while establishing a relationship Check Standard ID
(NID/ Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank Check Additional ID (valid
driving license, Credit Card-if any, Employer’s Certificate-in case of
employee, Utility Bill, Trade license, TIN and any other document that satisfy
identification for the Bank Approval from senior management should be obtained
Transaction is not allowed until risk is reduced Monitor the transaction Report
as STR Response: Unacceptable Risk Page 121 of 138 Customer belongs to the
countries identified by the bank as higher -risk because of its prior experiences
or other factors. Likely Major =3(High) CDD must be ensured & EDD must be
applied while establishing a relationship Check Standard ID (NID/ Birth
Registration Certificate along with recent photo ID/Valid passport(if any)
acceptable document to the Bank Check Additional ID (valid driving license,
Credit Card-if any, Employer’s Certificate-in case of employee, Utility Bill,
Trade license, TIN and any other document that satisfy identification for the
Bank Approval from senior management should be obtained Monitor the transaction
Transaction is not allowed until risk is reduced Report as STR Response:
Unacceptable Risk. Any country identified by FATF or FSRBs- (FATF style
Regional Body) as not having adequate AML&CFT systems Very Likely Major =4(Extreme)
Do not accept as customer Response: Unacceptable Risk Any bank that provide
service to ‘Shell Bank’ Very Likely Major =4(Extreme) Do not accept as customer
Response: Unacceptable Risk Any bank that allow payable through account Likely
Major =3(High) Particular attention should be paid & EDD must be applied
while establishing a correspondent banking relationship Detailed information on
the beneficial ownership of such banks shall have to be obtained. . Extensive
information about their policies and procedures on preventing money laundering
and terrorist financing shall have to be obtained. . Approval from senior
management should be obtained CDD must be ensured Transaction is not allowed
until risk is reduced Response: Unacceptable Risk. Any country identified as
destination of illicit financial flow Likely Major =3(High) CDD must be ensured
& EDD must be applied Transaction is not allowed until risk is reduced
Response: Unacceptable Risk. Page 122 of 138 Branches in a Border Area Likely
Moderate =2(Medium) Check Standard ID( NID/ Birth Registration Certificate
along with recent photo ID/Valid passport(if any) acceptable document to the
Bank CDD must be ensured & EDD should be applied Check Additional ID (valid
driving license, Credit Card-if any, Employer’s Certificate-in case of
employee, Utility Bill, Trade license, TIN and any other document that satisfy
identification for the Bank Physical verification. Response: Acceptable Risk
Area identified as high risk in the NRA Very Likely Major =4(Extreme) Do not
accept as customer Response: Unacceptable Risk Countries subject to UN
embargo/sanctions Very Likely Major =4(Extreme) Do not accept as customer
Response: Unacceptable Risk Publicly known vulnerable areas Likely Major
=3(High) Check Standard ID( NID/ Birth Registration Certificate along with
recent photo ID/Valid passport(if any) acceptable document to the Bank CDD must
be ensured & EDD must be applied Check Additional ID (valid driving
license, Credit Card-if any, Employer’s Certificate-in case of employee,
Utility Bill, Trade license, TIN and any other document that satisfy
identification for the Bank Physical verification. Transaction is not allowed
until risk is reduced Response: Unacceptable Risk. Drug ( Source, Destination
& Trafficking Countries) Very Likely Major =4(Extreme) Do not accept as
customer Response: Unacceptable Risk Page 123 of 138 5. Register for Regulatory
Risk R i s k Likelihood Impact Risk Score Treatment/Action Not having AML/CFT
guideline Unlikely Major =2(Medium) There must have AML/CFT Guidelines in the
Bank. Not forming a Central Compliance Unit (CCU) Unlikely Major =2(Medium) CCU
must be formed in the Bank. Not having an AML&CFT Compliance Officer
Unlikely Major =2(Medium) There must have a BAMLCO of all the Branches of the
Bank. Not having Branch Anti Money Laundering Compliance Officer Unlikely Major
=2(Medium) There must have a BAMLCO of all the Branches of the Bank. Not having
an AML&CFT program Unlikely Major =2(Medium) The concerned Department will
ensure AML/CFT compliance program regularly. No senior management commitment to
comply with MLP and AT Act Unlikely Major =2(Medium) There must have senior
management commitment to comply with MLP and AT Act Failure to follow the AMLD
/BFIU circular, circular letter, instructions etc. Unlikely Major =2(Medium)
All AML/BFIU circular must be followed. Not complying Freezing order issued by
BFIU Unlikely Major =2(Medium) All Branches/ Divisions at Head Office must
comply Freezing order issued by BFIU Unique account opening form not followed
while opening account Unlikely Major =2(Medium) All branches must follow unique
account opening form while opening the account. Non screening of new and
existing customers against UNSCR Sanction and OFAC lists Unlikely Major
=2(Medium) All branches must screen new and existing customers against UNSCR
Sanction and OFAC lists Violation of Foreign Exchange Regulation Act, 1947
while dealing with NRB accounts. Unlikely Major =2(Medium) All branches must
follow Foreign Exchange Regulation Act, 1947 while dealing with NRB accounts.
Complete and accurate information of customer not obtained Unlikely Major
=2(Medium) All branches must obtain complete and accurate information of
customer. Failure to verify the identity proof document and address of the
customer Very likely Major =4(Extreme) Close the account. Response:
Unacceptable Risk Page 124 of 138 Beneficial owner identification and
verification not done properly Likely Major =3(High) Check Standard ID
(NID/passport/, Birth Registration Certificate along with recent photo ID/Valid
passport(if any) acceptable document to the Bank Identification &
verification to be done through thanks letter or physical verification (if
necessary) Monitor the transaction. CDD must be ensured & EDD must be
applied. Report STR. Response: Unacceptable Risk. Customer/ Beneficial owner
identification & verification not done properly Unlikely Major =2(Medium)
Maintain KYC properly. Identification & verification to be done through
thanks letter or physical verification (if necessary) Response: Acceptable Risk
Customer Due Diligence (CDD) not practiced properly Unlikely Major =2(Medium)
CDD must be ensured & EDD must be applied properly. Response: Acceptable
Risk Failure to perform Enhanced Due Diligence (EDD) for high risk customers (i.e.,
PEPs, family members and close associates of PEPS and influential person and
senior official of international organization.) Unlikely Major =2(Medium) EDD
must be applied in case of all High Risk customers. Response: Acceptable Risk
Failure to complete KYC of customer including walk in customer Likely Moderate
=2(Medium) Monitor the transaction. CDD should be ensured & EDD must be
applied. Report as STR. Response: Acceptable Risk Failure to update TP and KYC
of customer Likely Moderate =2(Medium) Monitor the transaction. CDD must be
ensured & EDD should be applied. Marked as stop payment Report STR.
Response: Acceptable Risk Keep the legacy accounts operative without completing
KYC Likely Moderate =2(Medium) CDD must be ensured & EDD should be applied.
Mark the account as dormant. Response: Acceptable Risk Failure to assess the ML
& TF risk of a product or service before launching Unlikely Moderate
=1(Low) AML/CFT guidelines must be followed while launching product or service.
Response: Acceptable Risk Failure to complete the KYC of Correspondent Bank
Very likely Major =4(Extreme) Do not establish business relationship. Response:
Unacceptable Risk Page 125 of 138 Senior Management approval not obtained
before entering into a Correspondent Banking relationship Very likely Major
=4(Extreme) Do not establish business relationship. Response: Unacceptable Risk
Failure to comply with the instruction of BFIU by bank Foreign subsidiary
likely Major =3(High) Foreign subsidiary must be complied with the instruction
of BFIU. Response: Unacceptable Risk. Failure to keep record properly Unlikely
Major =2(Medium) Preserve all records relevant with the account for 5 years
after closer the account. Response: Acceptable Risk Failure to report complete
and accurate CTR on time Unlikely Major =2(Medium) The Bank shall be more
careful to report complete accurate CTR on time. Response: Acceptable Risk
Failure to review CTR Unlikely Major =2(Medium) The Bank shall be more careful
to review CTR . Response: Acceptable Risk Failure to identify and monitor
structuring Unlikely Major =2(Medium) The Bank shall be more careful to
identify and monitor structuring Monitor the transaction. Response: Acceptable
Risk Failure to provide sufficient controls and monitoring systems for the timely
detection and reporting of suspicious activity Unlikely Major =2(Medium) The
Bank shall be more careful for the timely detection and reporting of suspicious
activity Monitor the transaction. Response: Acceptable Risk Failure to conduct
quarterly meeting properly Unlikely Major =2(Medium) Conduct quarterly meeting
properly. Response: Acceptable Risk Failure to report suspicious transactions
(STR) Unlikely Major =2(Medium) The Bank shall be more careful to report STR
duly. Failure to conduct self assessment properly Unlikely Major =2(Medium)
Conduct self assessment properly. Response: Acceptable Risk Failure to submit
statement/ report to BFIU on time Unlikely Major =2(Medium) Accountability of
the concerned department should be introduced to ensure submission of all
required reports to BFIU in time. Response: Acceptable Risk Submit erroneous
statement/ report to BFIU Unlikely Major =2(Medium) All Branches/Divisions at
Head Office must submit accurate information requested by BFIU Response:
Acceptable Risk Not complying with any order for freezing or suspension of
transaction issued by BFIU or BB Unlikely Major =2(Medium) All branches must
complied BFIU or BB instructions. Response: Acceptable Risk Page 126 of 138 Not
submitting accurate information or statement sought by BFIU or BB. Unlikely
Major =2(Medium) Accurate information or statement must be submitted to BFIU or
BB as per requirement. Response: Acceptable Risk Not submitting required report
to senior management regularly. Likely Moderate =2(Medium) Required reports
must be submitted to senior management regularly. Response: Acceptable Risk
Failure to rectify the objections raised by BFIU or bank inspection teams on
time Likely Major =3(High) All objections raised by BFIU or bank inspection
teams must be rectified on time Response: Acceptable Risk Failure to obtain
information during wire transfer Likely Major =3(High) Obtain information of
applicant & Beneficiary. Stop the Transaction. Transaction is not allowed
until risk is reduced Response: Unacceptable Risk Failure to comply with the
responsibilities of ordering, intermediary and beneficiary bank Likely Major
=3(High) Obtain information of applicant & Beneficiary. Preserve the
information for minimum 5 years. Response: Unacceptable Risk. Failure to scrutinize
staff properly Unlikely Major =2(Medium) Concerned division will scrutinize
staff properly before appointment. Response: Acceptable Risk Failure to
circulate BFIU guidelines and circulars to branches Unlikely Major =2(Medium)
Concerned division must circulate BFIU guidelines and circulars to branches.
Response: Acceptable Risk Inadequate training/workshop arranged on AML &
CFT Unlikely Major =2(Medium) Bank shall take adequate measure to provide
proper training to Staff members. Response: Acceptable Risk No independent
audit function to test the AML program Unlikely Major =2(Medium) Bank must be
introduced to independent audit function to test the AML program. Response:
Acceptable Risk Page 127 of 15 KYC Documentation Annexure-B Customer type Standard
Identification document Document for verification of source offunds Document or
strategy for Verification of Passport addressØIndividuals
National Id CardØ Birth Registration CertificateØ (Printed copy, with
seal& Signature from the Registrar) Valid driving license(if any)Ø Credit Card (if any)Ø Any other documents thatØ satisfy to the bank. NB:
But in case of submitting the birth registration certificate, any other photo
id (issued by a Government department or agency)of the person has to be
supplied with it. If he does not have a photo id, then a certificate of
Identity by any renowned people has to be submitted According to the bank’s
requirement. That certificate must include a photo which is duly attested by
the signing renowned person. The person should sign the certificate (printing
his/her name clearly underneath) and clearly indicate his/her position or
capacity on it together with a contact address and phone number. Salary
CertificateØ (for
salaried person). Employed ID(ForØ ascertaining level Of
employment). Self declarationØ
acceptable to the bank. (commensurate with declared occupation) Documents inØ support of beneficial
owner’s income(income of house wife, students etc.) Trade License if theØ customer declared to be a
businessperson TIN(if any)Ø
Documents ofØ
property sale. (if any) Other BankØ
statement(if any) Document of FDRØ
encashment (if any) Document ofØ
foreign remittance (if any fund comes from outside the country) Document ofØ retirement benefit. Bank
loan.Ø Acknowledgement receipt of· thanks letter through
postal department. Proof of delivery of
thanks· letter through courier. Third party verification· report. Physical verification report· of bank official Copy of utility bill/utility· card on satisfaction of
the dealing officer (not beyond 3 months old).The bill should be in the name of
the applicant or his/her parent’s name. Residential address· appearing on an official
document prepared by a Government Agency Page 128 of 138 Customer type Standard
Identification document Document for verification of source of funds Document
or strategy for verification of address Passport·Joint
Accounts National Id Card·
Birth Registration· Certificate (Printed copy, with seal· & signature from the· Registrar) Valid driving license (if· any) Credit Card (if any)· Any other documents· (photo) that satisfy to the
bank. Salary Certificate (for· salaried person). Employed ID (For·
ascertaining level of employment). Self-declaration·
acceptable to the bank. (commensurate with declared occupation) Documents in support· of beneficial owner’s income
(income of house wife, students etc.) Trade License if the· customer declared to be a
business person TIN (if any)· Documents of·
property sale. (if any) Other Bank· statement (if any) Document of FDR·
encashment (if any)· Document of foreign· remittance (if any fund comes from· outside the country) Document of·
retirement benefit. Bank loan· Acknowledgement receipt· of thanks letter through postal
department. Proof of delivery of thanks· letter through courier. Third party verification· report. Physical verification· report of bank official Copy of utility bill/utility· card on satisfaction of
the dealing officer (not beyond 3 months old). The bill should be in the name
of the applicant or his/her parent’s name. Residential address· appearing on an official
document prepared by a Government Agency Page 129 of 138 Sole Proprietorships
or Individuals doing business Passport· National Id Card·
Birth Registration· Certificate Printed copy,
with seal & signature from the Registrar) Valid driving license (if· any) Credit Card (if any)· Rent receipt of the shop· (if the shop is rental) Ownership documents of· the shop ( i.e purchase
documents of the shop or inheritance documents) Membership certificate of· any association. (Chamber
of comers, market association, trade association i.e.; Hardware association,
cloth merchant association, hawker’s association etc. Any other documents that· satisfy to the bank. Trade License·
TIN·
Self declaration· acceptable to the bank.
(commensurate with nature and volume of business) Documents of·
property sale. (if injected any fund by selling personal property) Other Bank statement· (if any) Document of FDR·
encashment (if any fund injected by en-cashing personal FDR) Document of foreign· remittance (if any fund comes
from outside the country) Bank loan (if
any)· Personal borrowing (if· any) Acknowledgement receipt· of thanks letter through postal
department. Proof of delivery of thanks· letter through courier. Third party verification· report. Physical verification· report of bank official Copy of utility bill/ utility· card on satisfaction of
the dealing officer (not beyond 3 months old). The bill should be in the name
of the applicant or his/her parent’s name. Residential address· appearing on an official
document prepared by a Government Agency Page 130 of 138 Partnership deed/·Partnerships partnership letter Registered partnership· deed (if registered) Resolution of the partners,· specifying operational
guidelines/ instruction of the partnership account. Passport of partners· National Id Card of· partners Birth Registration· Certificate of partners (Printed
copy, with seal & signature from the Registrar) Valid driving license of· partners (if any) Credit Card of partners (if· any) Rent receipt of the shop (if· the shop is rental) Ownership documents of· the shop ( i.e. purchase
documents of the shop or inheritance documents) Membership certificate of· any association. (Chamber
of comers, market association, trade association i.e.; Hardware association,
cloth merchant association, hawker’s association etc. Any other documents that· satisfy to the bank. Trade License·
TIN·
Documents of· property sale. (if injected any
fund by selling personal property of a partner) Other Bank statement· (if any) Document of FDR·
encashment (if any partner injected capital by enchasing Personal FDR) Document of foreign· remittance (if any fund comes
from outside the country) Bank loan· Personal Borrowing (if· any) Acknowledgement receipt· of thanks letter through postal
department Proof of delivery of thanks· letter through courier. Third party verification· report. Physical verification· report of bank official Copy of utility bill /utility· card on satisfaction of
the dealing officer (not beyond 3 months old). The bill should be in the name
of the applicant or his/her parent’s name. Residential address· appearing on an official
document prepared by a Government Agency Page 131 of 138 Private Limited
Companies Passport of all the directors· National Id Card of all the· directors Certificate of·
incorporation Memorandum and Articles· of Association List of directors· Resolution of the board of· directors to open an
account and identification of those who have authority to operate the account. Power of attorney granted· to its Managers,
Officials or Employees to transact business on its behalf. Nature of the company’s· business Expected monthly turnover· Identity of beneficial· owners, holding 20% interest or
more of having control over the company’s assets and any person (or persons) on
whose instructions the signatories of the account act where such persons may
not be a full time employee , officer or director of the company. A copy of last·
available financial statements duly authenticatedby competent authority Other Bank statement· Trade License·
TIN·
VAT registration· Bank loan·
Page 132 of 138 Passport of all the directors·Public Limited National Id Card of all the· directors Certificate of incorporation· Memorandum and Articles· of Association Certificate of·
commencement of business List of
directors in form -· XII Resolution of the board of· directors to open an
account and identification of those who have authority to operate the account. Power of attorney granted· to its Managers,
Officials or Employees to transact business on its behalf. Nature of the company’s· business Expected monthly turnover· Identity of beneficial· owners, holding 20% interest or
more of having control over the company’s assets and any person (or persons) on
whose instructions the signatories of the account act where such persons may
not be a full time employee , officer or director of the company. A copy of last·
available financial statements duly certified by a professional accountant Other Bank statement· (if any) Trade License·
TIN·
Cash flow statement· VAT registration·
Bank loan·
Any other genuine· source Page 133 of 138 GovernmentOwned
entities Statue of formation of the· entity Resolution of the board to· open an account and
identification of those who have authority to operate the account. Passport of the operator (s)· National Id Card of the· operator (s) N/A N/A National Id Card of the·NGO operator (s) Passport of the operator(S)· Resolution of the board of· directors to open an
account and identification of those who have authority to operate the account. Documents of nature of the· NGO Certificate of registration· issued by competent
authority Bye-laws ( certified)· List of Management· Committee/ Directors A copy of last available· financial statements duly
certified by a professional accountant. Other Bank statement· TIN·
Certificate of Grand· / Aid Page 134 of 138
Charities or Religious Organizations National Id Card of the· operator (s) Passport of the·
operator (s) Resolution of the· Executive Committee to open an· account and identification of
those who have authority to operate the account. Documents of nature of the· Organisations Certificate of registration· issued by competent
authority (if any) Bye-laws ( certified)· List of Management· Committee/ Directors A copy of last·
available financial statements duly certified by a professional accountant Other Bank·
statement Certificate of Grant· / Aid/ donation Any other legal·
source Page 135 of 138 Clubs or Societies National Id Card of the· operator (s) Passport of the·
operator (s) Resolution of the· Executive Committee to
open an account and identification of those who have authority to operate the
account. Documents of nature of the· Organisations Certificate of registration· issued by competent
authority (if any) Bye-laws ( certified)· List of Management· Committee/ Directors A copy of last·
available financial statements duly certified by a professional (if registered)
Other Bank statement· Certificate of Grant· / Aid Subscription If unregistered·
declaration of authorized person/ body. Page 136 of 138 Trusts, Foundations or
similar entities National Id Card of the· trustee (s) Passport of the trustee(S)· Resolution of the· Managing body of the
Foundation/Association to open an account and identification of those who have
authority to operate the account. Certified true copy of the· Trust Deed Bye-laws ( certified)· Power of attorney allowing· transaction in the
account. A copy of last· available financial
statements duly certified by a professional (if registered) Other Bank statement· Donation·
Page 137 of 138 Financial Institutions (NBFI) Passport of all the directors· National Id Card of all the· directors Certificate of incorporation· Memorandum and Articles· of Association Certificate of·
commencement of business List of
directors in form -· XII Resolution of the board of· directors to open an
account and identification of those who have authority to operate the account. Power of attorney granted· to its Managers,
Officials or Employees to transact business on its behalf. Nature of the company’s· business Expected monthly turnover· Identity of beneficial· owners, holding 20% interest or
more of having control over the company’s assets and any person (or persons) on
whose instructions the signatories of the account act where such persons may
not be a full time employee , officer or director of the company. A copy of last·
available financial statements duly certified by a professional accountant. Other Bank statement· Trade License·
TIN·
VAT registration· Cashflow statement· Page 138 of 138 Valid Passport with visa of·Embassies the authorized official Clearance of the foreign· ministry Other relevant documents· in support of opening
account N/A· Page 139 of 138 Red Flags
pointing to Money Laundering Annexure-C n. -residents and their only purpose is
a capital investment (they are not interested in living at the property they
are buying). apparent business, economic or other legitimate reason and between
related persons. -sell Property shortly after purchase at a significantly
different purchase price, without corresponding changes in market values in the
same area. client’s normal profession or activities, without a reasonable
explanation. any reasonable explanation. to purchase, closing documents and
deposit receipts. make payments which are outside of the client’s profile.
difference “under the table”, (inadequate consideration). tification, statement
of income or employment details are provided by an intermediary who has no
apparent reason to be involved, (the intermediary may be the real client). and
there is no relationship seen between the transaction and the business activity
of the buying company, or the company has no business activity. rs’ drafts,
cashiers’ cheques and other cash equivalent or near cash monetary instruments
or in making wire transfers to and from other banks or financial institutions,
(anonymity). f transactions expected in the course of the business
relationship. -relative to conduct large transactions (same as above). occur
and / or is not consistent with the customer’s usual business activity. A
Letter of credit is generally resorted to so as to accord more legitimacy to
the transaction in order to conceal the real facts. the transaction. For
example receipt of an advance payment for a shipment from a new seller in a high-risk
jurisdiction. reasonable justification or that includes changes in regard to
the beneficiary or location of payment without any apparent reason. Page 140 of
138 of same business entity are indicators for TBML. In this regard the study
of foreign exchange remittances may help detect the offence. non co-operative
jurisdictions. ansshipped through one or more such high risk / sensitive
jurisdictions for no apparent economic reason. jurisdiction i.e. trade in goods
other than goods which are normally exported/ imported by a jurisdiction or
which does not make any economic sense. and the commodity’s fair market value.
the exporter or importer’s having regard to their regular business activities
or the shipment does not make economic sense i.e. there is no reasonable
explanation for the client’s financial investment into the shipment. or
management. Red Flags pointing to Financing of Terrorism Behavioral Indicators:
activities and organizations. -companies. Inclusion of the individual or entity
in the United Nations 1267 Sanctions list. activities. roperly identified.
-profit organization. Indicators linked to the financial transactions: -profit
organization is not consistent with the purpose for which it was established.
er as a means to hide the source and intended use of the funds. and withdrawals
with suspicious references. Multiple cash deposits in small amounts in an
account followed by a large wire transfer to another Page 141 of 138 country.
Use of multiple, foreign bank accounts. Page 138 of 138 Walk-in / One-off /
Online Customers Bangladesh Bank vide their BFIU Circular -10 dated 28/12/2014
instructed us to obtain satisfactory evidence for identification of applicant /
bearer who does not maintain account with us for conducting One off / Online transaction.
All Branches / Concerned division of Head Office are therefore requested to
preserve the following information along with appropriate documentary evidence
before making transaction. Customer’s Name : Father’s Name : Mother’s Name :
Date of birth : Nationality : Address : Documents (NID / Passport / BIN) to be
obtained Number of NID / Passport / BIN: Telephone / Mobile Number : Source of
Fund : Purpose of Deposit/ Withdrawal of Fund: Value of Transaction : Date
Signed Annexure D
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