Money Laudering Manual aspect of Bangladesh

MANUAL FOR PREVENTION OF
MONEY LAUNDERING

P R E F A C E


Bank is a financial institution that involves in diversified & complex financial activities and those activities are no longer limited within the geographic boundary of a country. Since its activity involves high risk, the issue of effective Anti-Money Laundering monitoring system, corporate governance, transparency, accountability has become significant issues to ensure smooth performance of the banking industry throughout the world. An effective Anti-Money Laundering system could have contributed significantly in improving the performance of the commercial banks if the control/ monitoring culture is brought in through policy guidelines and structural changes at the bank.

As a controlling authority of the Banks, Bangladesh Bank has devised and designed Anti-Money Laundering Guidelines making an attempt to draw attention to the banking industry of the country. As a regulating authority of the financial sector & segment of the economy, the issue of controlling & minimizing the risk elements in the Banking Industry is of vital issue as well as interest to Bangladesh Bank.


In view of the above Export Import Bank of Bangladesh Limited has prepared a Manual For Prevention of Money Laundering for establishing ‘Anti-Money Laundering System’ using the recommendations and suggestions as laid down in the Guidelines provided by Bangladesh Bank. All concerned are advised to keep themselves fully conversant with its contents and meticulous execution.


INTRODUCTION


Money Laundering in common term is “the act of turning of dirty or black money into clean or white money”. It is the practice of filtering ill-gotten gains or dirty money through a series of transactions so that the funds are cleaned to look like proceeds from legitimate sources.

Money Laundering now a days is one of the greatest challenges that the Governments and the Banks face in their globalised financial system. The international communities have taken several measures to fight money laundering across the world.

Bangladesh Government joined hands with the International world and enacted Money Laundering Prevention Act in the year 2002 to implement the anti money laundering programs. As a part of Government’s efforts Bangladesh Bank issued series of instructions to the Scheduled Banks for taking effective steps to combat the money laundering activities in the country’s financial arena.

In line with Government’s as well as Central Bank’s Policy & Guidelines and strong commitment to comply with the law of the land Export Import Bank of Bangladesh Ltd. identified the Money Laundering as one of its core risk areas and has been making all out efforts to prevent money laundering. In compliance with the directives of Bangladesh Bank in this respect, Export Import Bank of Bangladesh Ltd. imparted necessary trainings to its entire manpower and issued number of circulars to acquaint its officials with the money laundering acts & methods and the ways to counter the same. In order to streamline the anti money systems & procedures and to define the duties & responsibilities of the officials at different levels of Management these guidelines have been prepared in the light of the “Guidance notes” provided by Bangladesh Bank, for meticulous compliance by all concerned.


CHAPTER I: BACKGROUND
1.1 Introduction
1.1.1 These Guidelines have been prepared to facilitate the implementation of the Prevention of Money Laundering Act 2002, the Rules and Directives of the Bangladesh Bank.
1.1.2 The Guidelines are designed to counter money laundering activities.
1.1.3 The management of our Bank views money laundering prevention as part of their risk, management strategies and not simply as a stand-alone as required by the legislation.
1.1.4 Where there are provisions in these guidelines relating to an account or accounts these will have relevance to mainstream banking activity but should, by analogy, be adapted appropriately to the situations covered by other relevant business. For example ‘account’ could refer to bank accounts, fixed deposits or other investment products, trusts or a business relationship etc.

1.2 What is Money Laundering?
1.2.1 A definition of what constitutes the offence of money laundering under Bangladesh law is set out in Section 2(Tha) of the Prevention of Money Laundering Act 2002 (Act No. 7 of 2002) (Our Head Office Circular Letter No. A&I-/01 dated 03.08.02) which is reads as follows:
“Money Laundering means –
i) Properties acquired or earned directly or indirectly through illegal means;
ii) Illegal transfer, conversion, concealment of location or assistance in the above act of the properties acquired or earned directly of indirectly through legal or illegal means;”
1.2.2 Properties has been defined in section 2(Da) of the Act as “Properties means movable or immovable properties of any nature and description.
1.2.3 A concise working definition was adopted by Interpol General Secretariat Assembly in 1995, which defines money laundering as: “Any act or attempted act to conceal or disguise the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources”.
1.2.4 In lay terms Money Laundering is most often described as the “turning of dirty or black money into clean or white money”. If undertaken successfully, money laundering allows criminals to legitimize “dirty” money by mingling it with “clean” money, ultimately providing a legitimate cover for the source of their income. Generally, the act of conversion and concealment is considered crucial to the laundering process.

1.3 Why Money Laundering is done?
Criminals engage in money laundering for three main reasons: -
1.3.1 First, money represents the lifeblood of the organization that engages in criminal conduct for financial gain because it covers operating expenses, replenishes inventories, purchases the services of corrupt officials to escape detection and further the interests of the illegal enterprise, and pays for an extravagant lifestyle. To spend money in these ways, criminals must make the money they derived illegally appear legitimate.
1.3.2 Second, a trial 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.
1.3.3 Third, the proceeds from crime often become 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.

1.4 Why we must combat Money Laundering?
1.4.1 Money Laundering has potentially devastating economic, security, and social consequences. Money Laundering is a process vital to making crime worthwhile. 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 that result.
1.4.2 Money Laundering diminishes government tax revenue and therefore indirectly harms honest taxpayers. It also makes government tax collection more difficult.
1.4.3 Money Laundering distorts asset 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 crises.
1.4.4 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.
1.4.5 The International Money Fund has estimated that the magnitude of money laundering is between 2 and 5 percent of world gross domestic product, or at least USD.800 billion to USD.1.5 trillion. In some countries, these illicit proceeds dwarf government budgets, resulting in a loss of control of economic policy by governments.
1.4.6 It is generally recognized that effective efforts to combat money laundering 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 Guidelines were drawn up.

1.5 Stages of Money Laundering
1.5.1 There is no single method of laundering money. Methods can range from the purchase and resale of a luxury item (e.g. a house, car or jewellery) to passing money through a complex international web of legitimate businesses and ‘shell’ companies (i.e. those companies that primarily exist only as named legal entities without any trading or business activities).
1.5.2 Despite the variety of methods employed, the laundering is not a single act but a process accomplished in 3 basic stages which may comprise numerous transactions by the launderers that could alert a financial institution to criminal activity.
Placement – the physical disposal of the initial proceeds derived from illegal activity.
Layering – separating illicit proceeds from their source by creating complex layers of financial transactions designed to disguise the audit trail and provide anonymity.
Integration – the provision of apparent legitimacy to wealth derived criminally. If the layering process has succeeded, integration schemes place the laundered proceeds back into the economy in such a way that they re-enter the financial system appearing as normal business funds.
1.5.3 The three basic steps may occur as separate and distinct phases. 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. The table below provides some typical examples.
Placement stage
Layering stage
Integration stage
Cash paid into bank (sometimes with officer complicity or mixed with proceeds of legitimate business).

Cash exported.

Cash used to buy high value goods, property or business assets.

Cash purchase of single premium life insurance or other investment.
Sale or switch to other forms of investment.

Money transferred to assets of legitimate financial institutions.

Telegraphic transfers (often using fictitious names or funds disguised as proceeds of legitimate business).

Cash deposited in outstation branches and even overseas banking system.

Resale of goods/assets.
Redemption of contract or switch to other forms of investment.

False loan repayments or forged invoices used as cover for laundered money.

Complex web of transfers (both domestic and international) makes tracing original source of funds virtually impossible.
1.6 Vulnerability of the Financial System to Money Laundering
1.6.1 Money laundering is often thought to be associated solely with banks and moneychangers. All financial institutions, both banks and non-banks, are susceptible to money laundering activities. The sophisticated laundered often involves many other unwitting accomplices such as currency exchange houses, stock brokerage houses, gold dealers, real estate dealers, insurance companies, trading companies and others selling high value commodities and luxury goods.
1.6.2 Certain points of vulnerability have been identified in the laundering process, which the money laundered finds difficult to avoid, and where his activities are therefore more susceptible to being recognized. These are:
h entry of cash into the financial system;
h cross-border flows of cash; and
h transfers within and from the financial system.
1.6.3 While conducting relevant financial business in liquid products are clearly most vulnerable to use by money launderers, particularly where they are of high value. The liquidity of some products may attract money launderers since it allows them quickly and easily to move their money from one product to another, mixing lawful and illicit proceeds and integrating them into the legitimate economy.
1.6.4 Our bank branches may be used in the layering and integration stages of money laundering as well as the placement stage. Other loan accounts may be used as part of this process to create complex layers of transactions.
1.6.5 Electronic funds transfer systems increase the vulnerability by enabling the cash deposits to be switched rapidly between accounts in different names and different jurisdictions.
1.6.6 Investment and merchant banking businesses are less likely than banks and moneychangers to be at risk during the initial placement stage. The liquidity of many investment products particularly attracts sophisticated money laundering since it allows them quickly and easily to move their money from one product to another, mixing lawful and illicit proceeds and integrating them into the legitimate economy.
1.6.7 Intermediaries and product providers who deal direct with the public may be used at the initial placement stage of money laundering, particularly if they receive cash. Retail investment products are, however, more likely to be used at the layering and integration stages. The liquidity of a mutual funds may attract money launderers since it allows them quickly and easily to move their money from one product to another, mixing lawful and illicit proceeds and integrating them into the legitimate economy.

1.6.8 Intermediaries should therefore keep transaction records that are comprehensive enough to establish an audit trail. Such records can also provide useful information on the people and organizations involved in laundering schemes.

1.7 How to Combat Money Laundering
1.7.1 One of the best methods of preventing and deterring money laundering is a sound knowledge of a customer’s business and pattern of financial transactions and commitments. The adoption of “know your customer” is not only a principle of good business but is also an essential tool to avoid involvement in money laundering.
1.7.2 In complying with the requirements of the Act and in following these Guidance Notes the branches should at all times pay particular attention to the fundamental principle of good business practice – ‘know your customer’.

CHAPTER II: WHAT THE LAW REQUIRES
2.1 Requirements under the Money Laundering Prevention Act 2002
2.1.1 The legislation specifically relating to money laundering is contained in the Money Laundering Prevention Act 2002 (Act No. 7 of 2002) the provisions of which supercedes whatever may contain in any other Act in force in Bangladesh. So far as financial service providers are concerned, the Act:
h defines the circumstances, which constitute the offence of money laundering and provides penalties for the commission of the offence (See Section 2 Tha of the Act).
h requires banks, financial institutions and other institutions engaged in financial activities to establish the identity of their customers (See Section 10 Ka of the Act).
h requires banks, financial institutions and other institutions engaged in financial activities to retain correct and full information used to identify their customers and transaction records at least for five years after termination of relationships with the customers (See Section 19 Ka of the Act), and
h imposes an obligation on banks, financial institutions and other institutions engaged in financial activities and their employees to made a report to the Bangladesh Bank where:
- they suspect that a money laundering offence has been or is being committed (See Section 19 Ga of the Act) and;
- provide customer identification and transaction records to Bangladesh Bank from time to time on demand (See Section 19 Kha of the Act).

2.2 The Offence of Money Laundering
The money laundering offences are, in summary:
2.2.1 It is an offence for any person to obtain, retain, transfer, remit, conceal or invest moveable or immovable property acquired directly or indirectly through illegal means. (See Section 2 Tha). Concealing or disguising the property includes concealing or disguising its nature, source, location, disposition, movement, ownership or any rights with respect to it.
2.2.2 It is an offence for any person to illegally conceal, retain transfer, remit, or invest moveable or immovable property even when it is earned through perfectly legitimate means. (See Section 2 Tha). It is a defense if the person concerned can prove that the offence was committed without his knowledge or it has occurred despite his best efforts to prevent it. (See Section 20(1) of the Act).


2.2.3 It is also an offence for any individual or entity to provide assistance to a criminal to obtain, retain, transfer, remit, conceal or invest moveable or immovable property if that person knows or suspects that those properties are the proceeds of criminal conduct.
2.2.4 It is an offence for banks, financial institutions and other institutions engaged in financial activities not to retain identification and transaction records of their customers.
2.2.5 It is an offence for banks engaged in financial activities not to report the knowledge or suspicion of money laundering to Bangladesh Bank as soon as it is reasonably practicable after the information came to light.
2.2.6 It is also an offence for anyone to prejudice an investigation by informing i.e. tipping off the person who is the subject of a suspicion, or any third party, that a report has been made, or that the authorities are acting, or are proposing to act, in connection with an investigation into money laundering. Preliminary enquiries of a customer to verify identity or to ascertain the source of funds or the precise nature of the transaction being undertaken will not trigger a tipping off offence before a suspicious report has been submitted in respect of that customer unless the enquirer knows that an investigation is underway or that the enquiries are likely to prejudice an investigation. Where it is known or suspected that a suspicions report has already been disclosed to the authorities and it becomes necessary to make further enquiries, great care should be taken to ensure that customers do not become aware that their names have been brought to the attention of the law enforcement agencies.
2.2.7 It is an offence for any person to violate any freezing order issued by the Court on the basis of application made by Bangladesh Bank.
2.2.8 It is an offence for any person to express unwillingness, without reasonable grounds to assist any enquiry officer in connection with an investigation into money laundering.

2.3 Penalties for Money Laundering
All offences under the Act are non-bailable and the penalties for the commission of the offences all have prison terms and/or fines as prescribed in the Act as follows:
2.3.1 The offence of money laundering is punishable by terms of a minimum imprisonment for six months and a maximum of upto seven years plus a fine amounting to double the money laundered (See Section 13 of the Act).
2.3.2 The punishment for violation of Seizure Orders is a minimum imprisonment for one year or a fine of at least Taka ten thousand or both (See Section 14 of the Act).
2.3.3 The punishment for violation of Freezing Orders is a minimum imprisonment for one year or a fine of at least Taka five thousand or both (See Section 15 of the Act).
2.3.4 The offence of divulging information by informing i.e. tipping off the person who is the subject of a suspicion, or any third party is punishable by a minimum imprisonment for one year or a fine of at least Taka ten thousand, or both (See Section 14 of the Act).
2.3.5 The offence of obstructing investigations or failure to assist any enquiry officer in connection with an investigation into money laundering is punishable by a minimum imprisonment for one year or a fine of at least Taka ten thousand, or both (See Section 17 of the Act).
2.3.6 If any bank, financial institution and other institutions engaged in financial activities fall to retain customer identification and transaction records or fail to furnish required information as per the Act, Bangladesh Bank will report such failure to the licensing authority of the defaulting institution so that the concerned authority can take proper action for such negligence and failure (See Section 19 (3) of the Act).
2.3.7 Bangladesh Bank is empowered to impose fines of not less than Taka ten thousand and not more than Taka one lac on any bank, financial institution and other institution engaged in financial activities for the failure or negligence to retain customer identification and transaction records or fail to furnish required information to Bangladesh Bank (See Section 19(4) of the Act).
2.3.8 If any Company, Partnership Firm, Society, or Association violates any provisions of the Act, it will be deemed that every owner, partner, directors, employees and officers have individually violated such provisions.

CHAPTER III: ANTI MONEY LAUNDERING POLICY
3.1 Senior Management Commitment
3.1.1 The most important element of a successful anti money laundering program is the commitment of senior management including the Managing Director and the board of directors, to the development and enforcement of the anti money laundering objectives which can deter criminals from using their facilities for money laundering thus ensuring that they comply with their obligation under the law.
Senior management must send the signal that the corporate culture is as concerned about its reputation as it is about profits, marketing and customer service. As part of its anti money laundering policy a statement from the Managing Director that clearly sets forth its policy against money laundering and any activity which facilitates money laundering or the funding of terrorist or criminal activities. Such a statement should evidence the strong commitment of the institution and its senior management to comply with all laws and regulations designed to combat money laundering. The statement of compliance policy should at a minimum include:
h A statement that all employees are required to comply with applicable laws and regulations and corporate ethical standards.
h A statement that all activities carried on by the financial institution must comply with applicable governing laws and regulations.
h A statement that complying with rules and regulations is the responsibility of each individual in the financial institution in the normal course of their assignments. It is the responsibility of the individual to become familiar with the rules and regulations that relate to his or her assignment. Ignorance of the rules and regulations is no excuse for noncompliance.
h The statement should direct officer to a compliance officer or other knowledgeable individuals when there is a question regarding compliance matters.
h A statement that employees will be held accountable for carrying out their compliance responsibilities.







CHAPTER IV: ORGANIZATIONAL STRUCTURE
4.1 Designation of Anti Money Laundering Compliance Officers (AMLCO)
4.1.1 Export Import Bank of Bangladesh Ltd. designated a Chief Anti Money Laundering Compliance Officer (CAMLCO) at its Head Office as Head of Anti Money Laundering central Compliance Unit who has sufficient authority to implement and enforce corporate-wide anti money laundering policies, procedures and measures and who will report directly to senior management and the board of directors.
4.1.2 The designated CAMLCO must ensure that at each branch or unit of the financial unit that deals directly with the public, The Anti Money Laundering Compliance Unit to be established to ensure that each branch or unit is carrying out policies and procedures as required. A suggested format of an internal report form is set out in Annexure-G.
4.1.3 A sample job description of the Chief Anti Money Laundering Compliance Officers (CAMLCO) is appended below which may be adapted for creating a suitable job description of the Branch Unit Anti Money Laundering Compliance Officers (AMLCO).
4.1.4 POSITION TITLE: Chief Anti Money Laundering Compliance Officer.
4.1.5 FUNCTION: The Chief Anti Money Laundering Compliance Officer (CAMLCO), who will report to the Managing Director for this responsibility, coordinates and monitors day to day compliance with; applicable money laundering laws, rules and regulations; the Institution’s AML Policy (the “Policy”); and the practices, procedures and controls implemented by the Institution.
4.1.6 POSITION RESPONSIBILITIES:
4.1.6.1 Monitor, review and coordinate application and enforcement of the Bank’s/Institution’s compliance policies including Anti Money Laundering Compliance Policy. This will include: an AML risk assessment; and practices and controls for account opening, KYC procedures and ongoing account/transaction monitoring for detecting suspicious transactions/account activity, and a written AML training plan (refer to Chapter-IX).
4.1.6.2 To monitor changes of laws/regulations and directives of Bangladesh Bank and the Government that may require revisions to the Policy, and making these revisions;
4.1.6.3 Respond to compliance questions and concerns of the officer and advise branches/units and assist in providing solutions to potential issues involving compliance and money laundering risk;
4.1.6.4 Bank’s AML Policy is complete and upto date; maintain ongoing awareness of new and changing business activities and products and identify potential compliance issues that should be considered by the bank.
4.1.6.5 Assist in review of control procedures in the Bank to ensure legal and regulatory compliance and in the development of adequate and sufficient testing procedures to prevent and detect compliance lapses;
To manage the Suspicious Activity Reporting Process:
- Reviewing transactions referred by Central, branch or unit compliance officers as suspicious;
- Reviewing the Transaction Monitoring reports (directly or together with account management personnel);
- Ensuring that internal Suspicious Activity Reports (“internal SARs”):
- are prepared when appropriate;
- reflect the uniform standard for “suspicious activity involving possible money laundering” established in the Policy;
- are accompanied by documentation of the branch’s decision to retain or terminate the account as required under the Policy;
- are advised to other branches of the institution who are known to have a relationship with the customer;
- are reported to the Chief executive Officer, and the Board of Directors of the institution when the suspicious activity is judged to represent significant risk
- Ensuring that a documented plan of corrective action, appropriate for the seriousness of the suspicious activity be prepared and approved by the Branch Manager.
- Maintaining a review and follow up process to ensure that planned corrective action, including possible termination of an account, be taken in a timely manner;
- Manage the process for reporting suspicious activity to Bangladesh Bank authorities after appropriate internal consultation;
4.1.7 JOB CHARACTERISTICS AND REQUIREMENTS
The Chief Anti Money Laundering Compliance Officer (CAMLCO) should possess:
h Proven leadership and organizational skills and ability to exert managerial control;
h Excellent communication skills, with an ability to clearly and diplomatically articulate issues, solutions and rationale; effective trainer to raise the level of awareness of the control and compliance culture;
h Solid understanding of AML regulatory issues and product knowledge associated with a broad range of relevant financial services, banking activities;
h High degree of judgment, good problem solving skills and be results oriented to ensure sound implementation of control and compliance processes and procedures;
h High personal standard of ethics, integrity and commitment to fulfilling the objectives of the position and protecting the interest of the bank;
4.1.8 The Chief Anti Money Laundering Compliance Officer (CAMLCO)
h Must be familiar with the ways in which any of their respective business’s products and services may be abused by money launderers;
h Must be able to assist their respective Institutions, develop effective AML policies, including programs to provide AML training to all personnel;
h Must be able to assist their respective business, assess the ways in which products under development may be abused by money launderers in order to establish appropriate AML controls before product is rolled out into the marketplace;
h Must be capable of assisting their respective business, evaluate whether questionable activity is simple form under the standard net worth in the AML Policy under any applicable law and regulation;
h Must attend each year at least one formal AML training program either internal or external;
4.1.9 EDUCATION (or EQUIVALENT TRAINING)
The Chief Anti Money Laundering Compliance Officer (CAMLCO) should have a working knowledge of diverse banking products offered by the institution. The Chief Anti Money Laundering Compliance Officer (CAMLCO) should have a minimum of ten years of experience, with a minimum of three years at managerial level administrative.

4.2 Organization Structure
4.2.1 Whilst complying with rules and regulations is the responsibility of each individual in the financial institution in the normal course of their assignments, the following individuals and functions all play a vital role in the effectiveness of the Institutions AML program:
Account Officer/Relationship Manager – Officer
Anti Money Laundering Compliance Officer (AMLCO) – Designated Officer
Branch Manager (Unit Head) – Branch Incumbent/GB Incharge
Risk Management/Credit Officer – EO
Internal Control Officer – PO
Operations & Technology Manager – PO/SPO
Controller of Branches – VP
Chief Anti Money Laundering Compliance Officer (CAMLCO) – EVP/SVP
Chief Executive Officer (CEO) – MD

4.2.2 The Grid below details the individual responsibilities of the above functions: -
Function
Role/Responsibilities
Manager/2nd Officer/ Officer Responsible for account opening
▪ Perform due diligence on prospective clients prior opening an A/C.
▪ Be diligent regarding the identification(s) of account holder and the transactions relating to the account.
▪ Ensure all required documentation is completed satisfactorily.
▪ Complete the KYC Profile for the new customer.
▪ Ongoing monitoring of customer’s KYC profile and transaction activity.
▪ Obtain documentary evidence of large cash deposits.
▪ Escalate any suspicion to the Supervisor, Branch Manger and AMLCO.
Customer Service Officer
▪ Support the Account Officer in any of the above roles.
▪ Perform the Account Officer roles in their absence.
Operations Officer
▪ Ensuring that all control points are completed prior to transaction monitoring.
▪ Ongoing diligence on transaction trends for clients.
▪ Update customer transaction profiles in the ledger/system.
AMLCO
▪ Manages the transaction monitoring process.
▪ Reports any suspicious activity to Branch Manager, and if necessary the CAMLCO.
▪ Provide AML training to Branch officer.
▪ Update policy with local AML regulations and communicate to all officers.
▪ Submit branch returns to CAMLCO on Bimonthly basis (MIS).
Branch Manager (Unit head)
▪ Ensures that the AML program is effective within the branch/unit.
▪ First point of contact for any AML issues.
Risk Management/ Investment Officer/Internal Control Officer
▪ Perform AML Risk Assessment for the Business.
▪ Perform periodic Quality Assurance on the AML program in the unit.
▪ Communicate updates in AML laws and internal policies.
Operations & Technology Manager
▪ Ensures that the required reports and systems are in place to maintain an effective AML program.
Zonal Head
▪ Overall responsibility to ensure that the branches have an AML program in place and that it is working effectively.
CAMLCO
▪ Implements and enforces Institution’s anti money laundering policies.
▪ Reports suspicious clients to Bangladesh Bank on Institution’s behalf.
▪ Informs Controller of Branches/AMLCOs of required actions (if any).
Managing Director (MD)
▪ Overall responsibility to ensure that the business has an AML program in place and that it is working effectively.




4.2.3 A sample organization chart is given below:

Organization Chart


CHAPTER V: IDENTIFICATION PROCEDURES
5.1 Introduction
5.1.1 Sound Know Your Customer (KYC) procedures are critical elements in the effective management of banking risks.
5.1.2 Sound KYC procedures have particular relevance to the safety and soundness of financial institutions, in that:
h they help to protect financial institution’s reputation and the integrity of banking systems by reducing the likelihood of banks becoming a vehicle for or a victim of financial crime and suffering consequential reputation damage;
h they constitute an essential part of sound risk management (e.g. by providing the basis for identifying, limiting and controlling risk exposures in assets and liabilities, including assets under management).
5.1.3 The inadequacy or absence of KYC standards can subject banks to serious customer and counterparty risks, especially reputational, operational, legal and concentration risks.
5.1.4 Reputational risk poses a major threat to banks, since the nature of their business requires maintaining the confidence of depositors, creditors and the general marketplace. Reputational risk is defined as the potential that adverse publicity regarding a bank’s business practices and associations, whether accurate or not, will cause a loss of confidence in the integrity of the institution.
5.1.5 Operational risk can be defined as the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from external events.
5.1.6 Legal risk is the possibility that lawsuits, adverse judgments or contracts that turn out to be unenforceable can disrupt or adversely affect the operations or condition of a bank. Bank’s will be unable to protect themselves effectively from such legal risks if they do not engage in due diligence in identifying their customers and understanding their business.
5.1.7 On the liabilities side, concentration risk is closely associated with funding risk, particularly the risk of early and sudden withdrawal of funds by large depositors, with potentially damaging consequences for the bank’s liquidity.

5.2 Know Your Customer (KYC) Policies and Procedures
5.2.1 Having sufficient information about your customer – “knowing your customer” (KYC) – and making use of that information underpins all anti money laundering efforts, and is the most effective defense against being used to launder the proceeds of crime.
5.2.2 Section 19 Ka of the Prevention of Money Laundering Act 2002 requires all institutions to seek satisfactory evidence of the identity of those with whom they deal (referred to in these Guidelines as verification of identity).
5.2.3 When a business relationship is being established, the nature of the business that the customer expects to conduct with the institution should be ascertained at the outset to establish what might be expected later as normal activity. This information should be updated as appropriate, and opportunities arise. In order to be able to judge whether a transaction is or is not suspicious, institutions need to have a clear understanding of the business carried on by their customers.
Section 19 Ka of the Act requires that records of the verification of identity must be retained for five years after an account is closed or the business relationship ended (see Chapter-V – Record Keeping).
5.2.4 Export Import Bank of Bangladesh Ltd. in the design of KYC programs included certain key elements. Such essential elements started from the banks’ risk management and control procedures and should include (1) customer acceptance policy, (2) customer identification, (3) ongoing monitoring of high-risk accounts and (4) identification of suspicious transactions. Banks should not only establish the identity of their customers, but should also monitor account actively to determine those transactions that do not conform with the normal or expected transactions for that customer or type of account. KYC should be a core feature of banks’ risk management and control procedures, and be complemented by regular compliance reviews and internal audit. The intensity of KYC programs beyond these essential elements should be tailored to the degree of risk.

5.3 Customer Acceptance Policy
5.3.1 Our bank should develop clear customer acceptance policies and procedures, including a description of the types of customer that are likely to pose a higher than average risk to a bank. In preparing such policies, factors such as customers’ background, country of origin, public or high profile position, linked accounts, business activities or other risk indicators should be considered.
5.3.2 Our bank should develop graduated customer acceptance policies and procedures that require more extensive due diligence for higher risk customers. For example, the policies may require the most basic account opening requirements for a working individual with a small account balance. 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 banking services, especially for people who are financially or socially 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.

5.4 Customer Identification
5.4.1 Customer identification is an essential element of KYC standards. For the purposes of this Guidance Notes, a customer includes:
h the person or entity that maintains an account with the bank or those on whose behalf an account is maintained (i.e. beneficial owners);
h the beneficiaries of transactions conducted by professional intermediaries; and
h any person or entity connected with a financial transaction who can pose a significant reputational or other risk to the bank.
5.4.2 The customer identification process applies naturally at the outset of the relationship. To ensure that records remain upto date and relevant, there is a need for banks to undertake regular reviews of existing records.
5.4.3 Whenever the opening of an account or business relationship is being considered, or a one-off transaction or series of linked transactions of Tk.5,000 or more is to be undertaken, identification procedures must be followed. Identify must also be verified in all cases where money laundering is known, or suspected.
5.4.4 Once verification of identify has been satisfactorily completed, no further evidence is needed when other transactions are subsequently undertaken. Records must be maintained as set out Chapter-VII, and information should be updated or reviewed as appropriate.

5.5 What Constitutes a Person’s Identity
5.5.1 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, body corporate, partnership, etc.). For the purposes of this guidance, the two elements are (BCD letter No. BCD/02 dt. 27.07.02):
h the physical identity (e.g. name, date of birth, TIN/voter registration/passport/ID number, etc.); and
h the activity undertaken.
5.5.2 Confirmation of a person’s address is also useful in determining whether a customer is resident in a high-risk country. 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 issue should be recorded.
5.5.3 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.
5.5.4 When commencing a business relationship, the bank should consider recording the purpose and reason for establishing the business relationship, and the anticipated level and nature of activity to be undertaken. Documentation about the nature of the applicant’s business should also cover the origin of funds to be used during the relationship. For example funds may be transferred from a bank or the applicant’s employer, or be the proceeds of a matured insurance policy, etc.
5.5.5 Once account relationship has been established, reasonable steps should be taken by the institution to ensure that descriptive information is kept upto date as opportunities arise.

5.6 Individual Customers
5.6.1 Where verification of identify is required, the following information should be obtained from all individual applicants for opening accounts or other relationships, and should be independently verified by the institution itself:
h true name and/or names used;
h parent’s names;
h date of birth;
h current and permanent address;
h details of occupation/employment and sources of wealth or income.
5.6.2 One or more of the following steps is recommended to verify addresses:
h provision of a recent utility bill, tax assessment or bank statement containing details of the address (to guard against forged copies, it is strongly recommended that original documents are examined);
h checking the Voter lists;
h checking the telephone directory;
h record of home/office visit;
The information obtained should demonstrate that a person of that name exists at the address given, and that the applicant is that person.
5.6.3 The date of birth is important as an identifier in support of the name, and is helpful to assist law enforcement. Although there is no obligation to verify the date of birth, this provides an additional safeguard. It is also helpful for residence/nationality to be ascertained to assist risk assessment procedures and to ensure that an institution does not breach UN or other international financial sanctions.
5.6.4 Identification documents, either originals or certified copies, should be pre-signed and bear a photograph of the applicant, e.g.
i) Current valid passport;
ii) Valid driving licence;
iii) Voter ID Card;
iv) Armed Forces ID card;
v) A Bangladeshi employer ID card bearing the photograph and signature of the applicant; or
vi) A certificate from any local government organs such as Union Council chairman, Ward Commissioner, etc. or any respectable person acceptable to the institution.
5.6.5 Where applicants put forward documents with which the bank is unfamiliar, either because of origin, format or language, the institution must take reasonable steps to verify that the document is indeed genuine, which may include contacting the relevant authorities or obtaining a notarized translation. The branches should also be aware of the authenticity of passports.
5.6.6 Where there is no face-to-face contact, and photographic identification would clearly be inappropriate, procedures to identify and authenticate the customer should ensure that there is sufficient evidence, either documentary or electronic to confirm address and personal identity.
5.6.7 In respect of joint accounts where the surname and/or address of the account holders differ the name and address of all account holders, not only the first named, should normally be verified in accordance with the procedures set out above.
5.6.8 File copies of supporting evidence should be retained. Where this is not possible, the relevant details should be recorded on the applicant’s file. Institutions, which regularly conduct one-off transactions, should record the details in a manner which allows cross reference to transaction records. Such institutions may find it convenient to record identification details on a separate form, similar to the example in Annexure-E to be retained with copies of any supporting material obtained.
5.6.9 Any subsequent change to the customer’s name, address, or employment details of which the financial institution becomes aware should be recorded as part of the know your customer process. Generally this would be undertaken as part of good business practice and due diligence but also serves for money laundering prevention.
5.6.10 An introduction from a respected customer personally known to the management or from a trusted member of officer, may assist the verification procedure but does not replace the need for verification of address as set out above. Details of the introduction should 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 officer to breach account opening procedures as a favor to an applicant.

5.7 Persons without Standard Identification Documentation
5.7.1 Most people need to make use of the financial system at some point in their lives. 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 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.
5.7.2 A certifier must be a suitable person, such as for instance a lawyer, accountant, 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.
5.7.3 In these cases, it may be possible for the bank to accept confirmation 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 manager may authorize the opening of a business relationship if she/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.
5.7.4 For students or other young people, the normal identification procedures set out 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.
5.7.5 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, should be verified.

5.8 Corporate Bodies and other Entities
5.8.1 The principal requirement for corporate bodies is to look behind a corporate entity to identify those who have ultimate control over the business and the company’s assets, with particular attention being paid to any shareholders or others who exercise a significant influence over the affairs of the company. Enquiries should be made to confirm that the company exists for a legitimate trading or economic purpose and that it is not merely a “brass plate company” where the controlling principals cannot be identified.
5.8.2 The following documents should normally be obtained from companies:
h Certified true copy of Certificate of Incorporation or equivalent, details of the registered office and place of business;
h Certified true copy of the Memorandum and Articles of Association or by-laws of the client;
h Copy of the board resolution to open the account relationship and the empowering authority for those who will operate any accounts;
h Explanation of the nature of the applicant’s business, the reason for the relationship being established, an indication of the expected turnover, the source of funds and a copy of the last available financial statements where appropriate;
h Satisfactory evidence of the identity of each of the principal beneficial owners being any person holding 10% interest or more or with principal control over the company’s assets and any person (or persons) on whose instructions the signatories on the account are to act or may act where such persons are not full time employees, officers or directors of the company;
h Satisfactory evidence of the identity of the account signatories, details of their relationship with the company and if they are not employees an explanation of the relationship. Subsequent changes to signatories must be verified;
h Copies of the list/register of directors.
5.8.3 Where the business relationship is being opened in a different name from that of the applicant, the branch should also satisfy itself that the reason for using the second name makes sense.
5.8.4 The following persons (i.e. individuals or legal entities) must also be identified in line with this part of the notes:
h All of the directors who will be responsible for the operation of the account/transaction.
h All the authorised signatories for the account/transaction.
h All holders of powers of attorney to operate the account/transaction.
h The beneficial owner(s) of the company.
h The majority shareholders of a private limited company.
A letter issued by a corporate customer similar to Annexure-D is acceptable in lieu of passport or other photo identification documents of their shareholders, directors and authorised signatories. Where the institution already knows their identities and identification records already accord with the requirements of these notes, there is no need to verify identity again.
5.8.5 When authorised signatories change, care should be taken to ensure that the identities of all current signatories have been verified. In addition, it may be appropriate to make periodic enquiries to establish whether there have been any changes in directors/shareholders, or the nature of the business/activity being undertaken. Such changes could be significant in relation to potential money laundering activity even though authorised signatories have not changed.

5.9 Partnerships and Unincorporated Business
5.9.1 In the case of partnerships and other unincorporated businesses whose partners/directors are not known to the institution, the identity of all the partners or equivalent should be verified in line with the requirements for personal customers (Annexure-D). Where a formal partnership agreement exists, a mandate from the partnership authorizing the opening of an account and conferring authority on those who will operate it, should be obtained.
5.9.2 Evidence of the trading address of the business or partnership should be obtained alongwith a copy of the latest report and accounts (audited where applicable).
5.9.3 An explanation of the nature of the business or partnership should be ascertained (but not necessarily verified from a partnership deed) to ensure that it has a legitimate purpose.

5.10 Powers of Attorney/Mandates to Operate Accounts
5.10.1 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 guarantor of the power of attorney and third party mandates. Records of all transactions undertaken as per a power of attorney should be kept in accordance with Chapter-VII.

5.11 Requirements in respect of Accounts Commenced Prior to 30 April 2002
5.11.1 Anti money laundering legislation and requirements in respect of KYC procedures for business relationships did not apply prior to 30th April 2002. In these cases, all branches must review existing business relationships commenced prior to 30th April 2002 (referred to in this section as “pre 2002 accounts”) to establish whether any documentary evidence required by their current KYC procedures is lacking.
5.11.2 When a branch’s management reviews a pre-2002 account, the form in Annexure-E should be used. The Manager/2nd Officer & GB incharge must also sign the form. This form must be retained with client records, and will be treated as a constituent element of the institution’s KYC documentation for a pre-2002 account.
5.11.3 In carrying out their review of pre-2002 accounts, management must decide whether to obtain any missing elements of the documentary evidence, or to decide that in light of the existing nature of the business relationship, it is unnecessary to do so. Each business relationship must be treated in one-way or the other. A decision must not be taken on the basis of categories of groups of clients.
5.11.4 When reviewing the nature of a business relationship, branch should take into account a number of considerations, such as the length of time the relationship has been in place, the frequency with which the institution has contact with the client, and the volumes and numbers of transactions. Such factors will help determine whether it is necessary to update or supplement KYC documentation already held.
5.11.5 Where it is decided to seek missing documentation, the branches must do so at the earliest possible opportunity and persist until the information is received, or the original decision revised. Where missing information is not obtained within a reasonable period of time, the branch should consider termination of the business relationship.

5.12 Internet or Online Banking
5.12.1 Banking and investment business on the Internet add a new dimension to Banking activities. The unregulated nature of the Internet is attractive to criminals, opening up alternative possibilities for money laundering, and fraud.
5.12.2 It is recognized that online transactions and services are convenient. However, it is not appropriate that bank should offer online live account opening allowing full immediate operation of the account in a way, which would dispense with or bypass normal identification procedures.
5.12.3 However, initial application forms could be completed online and then followed up with appropriate identification checks.
5.12.4 The development of technologies such as encryption, digital signatures, etc., and the development of new financial services and products, makes the Internet a dynamic environment offering significant business opportunities.

5.13 Provision of Safe Custody and Safety Deposit Boxes
Where facilities to hold boxes, parcels and sealed envelopes in safe custody are made available, it is expected that our bank will follow the identification procedures set out in these Guidelines. In addition such facilities should only be made available to account holders.



CHAPTER VI: ANTI MONEY LAUNDERING PROCESSES
6.1 Know Your Customer (KYC) Procedures
6.1.1 Each branch is to perform due diligence on all prospective clients prior to opening an account. This process is completed by fulfilling the documentation requirements (Account Application, Bank References, Source of funds and Identification for example) and also a ‘Know Your Customer’ (KYC) profile which is used to record a client’s source of wealth, expected transaction activity at it’s most basic level in order to monitor the conduct of the relationship/ account to ensure that it is consistent with the nature of business stated when the relationship/ account was opened.
6.1.2 KYC profile gives the basic information about the customer like, Name, Address, Tel/Fax Numbers, line of business, Annual sales. If the customer is a Public Figure, the account will become automatically a High Risk Account.
6.1.3 The KYC Profile information will also include the observations of the branch’s Officer when they visit the customer’s business place like, the business place is owned or rented, the type of clients visited, by what method is the client paid (cheque or cash). The concerned employee will record his observations and sign the KYC Profile form.
6.1.4 In the case of high net worth Accounts, the information will include net worth of the customer, source of funds etc.
6.1.5 The KYC Profile leads to Risk Classification of the Account as High/Low Risk.

Officer assessment or
Customer provided

KYC
Profile

Risk
Classification
Frequency of Monitoring & Review


6.2 Risk Categorization – Based on Activity/KYC Profile
6.2.1 When opening accounts, the concerned staff/officer must assess the risk that the accounts could be used for “money laundering”, and must classify the accounts as either High Risk or Low Risk. The risk assessment may be made using the KYC Profile Form given in Annexure-C in which following seven risk categories are scored using a scale of 1 to 5 where scale 4-5 denotes High Risk, 3-Medium Risk and 1-2 Low Risk:
h Occupation or nature of customer’s business
h Net worth/sales turnover of the customer
h Mode of opening the account
h Expected value of monthly transactions
h Expected number of monthly transactions
h Expected value of monthly cash transactions
h Expected number of monthly cash transactions
6.2.2 The risk scoring of less than 14 indicates low risk and more than 14 would indicate high risk. The risk assessment scores are to be documented in the KYC Profile Form (see Annexure-C). However, branch management may judiciously override this automatic risk assessment to “Low Risk” if it believes that there are appropriate mitigates to the risk. This override decision must be recorded (reasons way) and approved by the Branch Manager and Branch AML Compliance Officer.
6.2.3 KYC Profiles and Transaction Profiles must be updated and re-approved at least annually for “High Risk” accounts (as defined above). There is no requirement for periodic updating of profiles for “Low Risk” transactional accounts. These should of course be updated if and when an account is reclassified to “High Risk” or as needed in the event of investigations of suspicious transactions or other concern.

6.3. Transaction Monitoring Process
6.3.1 Our bank has to develop systems and controlling on an ongoing basis to monitor the relevant activities in the course of the business relationship. Possible areas to monitor could be: -
a. Transaction type
b. Frequency
c. Unusually large amounts
d. Geographical origin/destination
e. Changes in account signatories
6.3.2 It is recognized that the most effective method of monitoring of accounts is achieved through a combination of computerized and human manual solutions. A corporate compliance culture, and properly trained, vigilant officer through their day-to-day dealing with customers, will form an effective monitoring method as a matter of course. Computerized approaches may include the setting of “floor levels” for monitoring by amount. Different “floor levels” or limits may be set for different categories of customers.
6.3.3 The Customer Category is assigned at account inception and may be periodically revised and is documented on the Transaction Profile. Transaction Limits are established by the business subject to agreement by Branch AMLCO. The Customer Categories and Transaction Limits are maintained in computer systems.
6.3.4 On a monthly basis Branch must prepare an exception report of customers whose accounts showed one or more individual account transaction during the period that exceeded the transaction limit established for that category of customer based on Anti Money Laundering the risk assessment exercise.
6.3.5 Designated officer will review and sign off on such exception report of customers whose accounts showed one or more individual account transaction during the period that exceeded the “transaction limit” established for that category of customer. The concerned officer will document their review by initial on the report and where necessary will prepare internal Suspicious Activity Reports (SARs) with action plans for approval by the relevant Branch Manager and review with the Branch AMLCO. A copy of the transaction identified will be attached to SARs.
6.3.6 AMLCO will review the SARs and responses from the Designated officer or other concerned officer. If the explanation for the exception does not appear reasonable then the Branch should review the transaction prior to considering submitting them to the zonal AMLCO or CAMLCO.
6.3.7 If the Branch and/or AMLCO believe the transaction should be reported then the AMLCO will supply the relevant details the ZAMLCO or the CAMLCO.
6.3.8 The ZAMLCO and AMLCO will investigate any reported accounts and will send a status report on any of the accounts reported. No further action should be taken on the account until notification has been received.
6.3.9 If, after confirming with the client the transaction trend is to continue the Designated officer is responsible for documenting the reasons why the transaction profile has changed and should amend the KYC profile accordingly.


6.4 Suspicious Activity Reporting Process
6.4.1 The branches should ensure that officer report of all suspicious activities to their Branch/Unit level AMLCO and that any such report be considered in the light of all other relevant information by the AMLCO or by another designated person, for the purpose of determining whether or not the information or other matter contained in the report does give rise to a knowledge or suspicion (See section 2 Umah of the AML Circular # 2 of Bangladesh Bank).
6.4.2 Where officer continues to encounter suspicious activities on an account which they have previously reported to the AMLCO they should continue to make reports to the AMLCO whenever a further suspicious transaction occurs and the AMLCO should determine whether a disclosure in accordance with regulations is appropriate.
6.4.3 All reports of suspicious activities must reach the CAMLCO and only the CAMLCO should have the authority to determine whether a disclosure in accordance with the regulation is appropriate. However the Designated officer can be permitted to add his comments to the suspicion report indicating any evidence as to why he/She believes the suspicion is not justified.
6.4.4 Detailed procedures on reporting of suspicious activities are given in Chapter-VIII of this Guidelines.

6.5 Self-Assessment Process
An annual self-assessment process will be established to assess how effectively the Bank’s anti money laundering procedures enable management to identify areas of risk or to assess the need for additional control mechanisms. A report in this connection be prepared on the followings:
h Whether Anti Money Laundering procedures are in place.
h Whether Anti Money Laundering Procedures are being adhered to.
h Whether Anti Money Laundering Procedures comply with all policies, controls and statutory requirements.
(Secret Circular letter No. BCD/02 dated: 27-07-2002)

6.6 System of Independent Procedures Testing
Testing is to be conducted at least annually by the Bank’s internal audit personnel and by an outside party such as the institution’s external auditors. The test include:
h Interview with employees handling transactions and interview with their supervisors to determine their knowledge and compliance with the financial institution’s Anti-Money Laundering procedures.
h A sampling of large transactions followed by a review of transaction record retention forms and suspicious transaction referral forms.
h A test of the validity and reasonableness of any exemptions granted by the financial institution; and
h A test of the record keeping system according to the provisions of the Act.
Any deficiencies should be identified and reported to senior management together with a request for a response indicating corrective action taken or to be taken and a deadline.

CHAPTER VII: RECORD KEEPING
7.1 Statutory Requirements
7.1.1 The requirement contained in Section 19 Ka of the Act to retain correct and full records of customers identification and transactions at least for five years after termination of relationship with the customers is an essential constituent of the audit trail that the law seek to establish.
7.1.2 If the law enforcement agencies investigating a money laundering case cannot link funds passing through the financial system with the original criminal money then confiscation of those funds cannot be made.
7.1.3 The records prepared and maintained by its customer relationships and transactions should be such that:
h Requirements of legislation and Bangladesh Bank directives are fully met;
h Competent third parties will be able to assess the observance of money laundering policies and procedures;
h Any transactions effected can be reconstructed;
h Any customer can be properly identified and located;
h All suspicious reports received internally and those made to Bangladesh Bank can be identified; and
h The institution can satisfy within a reasonable time any enquiries or court orders from the appropriate authorities as to disclosure of information.
7.1.4 Where there has been a report of a suspicious activity concerning to a client or transaction records concerning to the transaction or the client should be retained until confirmation is received that the matter has been concluded.

7.2 Documents Verifying Evidence of Identity and Transaction Records
7.2.1 Records relating to verification of identity will generally comprise:
h A description of the nature of all the evidence received relating to the identity of the verification subject:
h The evidence itself or a copy of it or, if that is not readily available, information reasonably sufficient to obtain such a copy.
7.2.2 Records relation to transactions will generally comprise:
h Details of personal identity including the names and addresses etc. as prescribed by Bangladesh Bank under AML Circular # 2 and subsequent directives pertaining to:
1) The customer;
2) The beneficial owner of the account or product;
3) The non-account holder conducting any significant one-off transaction;
4) Any counter-party;
h Details of transaction including:
5) The nature of such transactions;
6) Customer’s instruction(s) and authority (ies);
7) Source(s) and volume of funds;
8) Destination(s) of funds;
9) Book entries;
10) Custody of documentation;
11) The date of the transaction;
12) The form (e.g. cash, cheque) in which funds are offered and paid out.
7.2.3 These records of identity must be kept for at least five years from the date when the relationship with the customer has ended. This is the date of:
i. The carrying out of the one-off transaction or the last in a series of linked one-off transaction; or
ii. The ending of the business relationship; or
iii. The commencement of proceedings to recover debts payable on insolvency.

7.3 Formats and Retrieval of Records
7.3.1 To satisfy the requirements of the law it is important that records are capable of retrieval without undue delay. It is not necessary to retain documents in their original hard copy form provided that the firm has reliable procedures for holding records in microfiche or electronic form as appropriate and that these can be reproduced without undue delay. In addition an institution may rely on the records of a third party, such as a bank or clearing house in respect of details of payments made by customers. However, the primary requirement is on the institution itself and the onus is thus on the business to ensure that the third party is willing and able to retain and if asked to produce copies of the records required.
7.3.2 However, the record requirements are the same regardless of the format in which they are kept or whether the transaction was undertaken by paper or electronic means. Documents held centrally must be capable of distinguishing between the transactions relating to different customers and of identifying where the transaction took place and in what form.

7.4 Wire Transfer Transactions
7.4.1 Investigations of major Money Laundering cases over the last few years have shown that criminals make extensive use of Telegraphic Transfers (TT) and electronic payment and message systems. The rapid movement of funds between accounts in different jurisdictions increases the complexity of investigations. In addition, investigations become even more difficult to pursue if the identity of the original ordering customer or the ultimate beneficiary is not clearly shown in a TT and electronic payment message instruction. (Circular Letter No. BCD/1823 dated: 21.10.03).
7.4.2 Following the recent focus on terrorist financing, relevant financial businesses are required to include accurate and meaningful originator (name, account number and where possible address) and beneficiary information (account name and/or account number) on all outgoing funds transfers and related messages that are sent and this information should remain with the transfer or related message throughout the payment chain. Institutions should conduct enhanced scrutiny of and monitor for suspicious incoming funds transfers, which do not contain meaningful originator information.
7.4.3 The records of electronic payments and messages must be treated in the same way as any other records in support of entries in the account and kept for a minimum of five years.

7.5 Investigations
7.5.1 Where any Branch has submitted a report of suspicious activity of Bangladesh Bank as per our manual or where it knows that a client or transaction is under investigation, it should not destroy any relevant records without the agreement of the Bangladesh Bank even though the five years limit may have been reached.
7.5.2 Branches should maintain a register or tabular records of all investigations made to it by the Bangladesh Bank and all disclosures to the Bangladesh Bank. The register should be kept separate from other records and contain as a minimum the following details:
i. The date and nature of the enquiry.
ii. Details of the accounts(s) involved; and
iii. Be maintained for a period of at least 5 years.

7.6 Training Records
EXIM Bank should arrange training for its officials to comply with regulations and maintain records, which include:
(i) Details of the content of the training programs provided;
(ii) The name of officers who have received the training;
(iii) The date on which the training was delivered;
(iv) The results of any testing carried out to measure officer understanding of the Money Laundering requirements; and
(v) An on-going training plan.

CHAPTER VIII: RECOGNITION AND REPORTING OF SUSPICIOUS TRANSACTIONS
8.1 Recognition of Suspicious Transactions
8.1.1 A suspicious transaction will often be one that is inconsistent with a customer’s known, legitimate business or personal activities or with the normal business for the type of customer. Therefore, the first key to recognition is knowing enough about the customer’s business to recognize that a transaction, or series of transactions, is unusual.
8.1.2 Questions that a branch must consider when determining whether an established customer’s transaction must be suspicious are:
h Is the size of the transaction consistent with the normal activities of the customer?
h Is the transaction rational in the context of the customer’s business or personal activities?
h Has the pattern of transactions conducted by the customer changed?
h Where the transaction is international in nature, does the customer have any obvious reason for conducting business with the other country involved?
8.1.3 Examples of what might constitute suspicious transactions are given by types of business in Annexure-F. These are not intended to be exhaustive and only provide examples of the most basic way by which money may be laundered. However, identification of any of the types of transactions listed in Annexure-G should prompt further investigation and be a catalyst towards making at least initial enquiries about the source of funds.

8.2 Reporting of Suspicious Transactions
8.2.1 There is a statutory obligation on all official to report suspicions of Money Laundering. Section 19 Ga of the Act contains the requirement to report to the Bangladesh Bank. Actual reporting should be made in accordance with an internal reporting procedure to be established by a financial institution for the purposes of facilitating the operation of the reporting obligation.
8.2.2 It has to be ensured:
h That each relevant employee knows to which person they should report suspicions, and
h That there is a clear reporting chain under which those suspicions will be passed without delay to the Chief Anti Money Laundering Compliance Officer.
8.2.3 Where it is impossible in the circumstances to refrain from executing a suspicious transaction before reporting to the Bangladesh Bank or where reporting it is likely to frustrate efforts to pursue the beneficiaries of a suspected Money Laundering operation, the branches shall apprise the Bangladesh Bank immediately afterwards. While it is impossible to spell out in advance how to deal with every possible contingency, in most cases common sense will suggest what course of action is most appropriate. Where there is doubt, the advice of the Anti Money Laundering Compliance Officer may by sought.
8.2.4 It is the Chief Anti Money Laundering Compliance Officer (CAMLCO) who will have the responsibility in the bank for communicating reports of suspicious transactions to the Anti-Money Laundering Department of Bangladesh Bank and who will act as the liaison officer between the Export Import Bank of Bangladesh Ltd. and the Bangladesh Bank.
8.2.5 The CAMLCO must take steps to validate the suspicion in order to judge whether or not a report should be submitted to Bangladesh Bank. In making this judgment, he should consider all other relevant information available within the Bank concerning the person or business to which the initial report relates. This may include a review of other transaction patterns and volumes through the account or accounts in the same name the length of the relationship and referral to identification records held. If, after completing this review, the CAMLCO decides that there are no facts that would negate the suspicion, then he will disclose the information to Bangladesh Bank.
8.2.6 The determination of whether or not to report implies a process with at least some formality attached to it. It does not necessarily imply that the CAMLCO must give reasons for negating, and therefore not reporting any particular matter, but it clearly would be prudent for internal procedures to require that written reports are submitted and that he should record his determination in writing. Clearly in cases where there is a doubt it would be prudent for the CAMLCO to make a report to the Bangladesh Bank.
8.2.7 The CAMLCO will be expected to act honestly and reasonably and to make his determinations in good faith. Provided the CAMLCO or an authorized deputy does act in good faith in deciding not to pass on any suspicions report, there will be no liability for non-reporting if the judgment is later found to be wrong.
8.2.8 Care should be taken to guard against a report being submitted as a matter of routine to Bangladesh Bank without undertaking reasonable internal enquires to determine that all available information has been taken into account.

8.3 Internal Reporting Procedures and Records
8.3.1 Reporting lines should be as short as possible, with the minimum number of people between the person with the suspicion and the CAMLCO. This ensures speed, confidentiality and accessibility to the CAMLCO.
8.3.2 Supervisors should also be aware of their own legal obligations. He has a legal obligation to report to the AMLCO.
8.3.3 All suspicions reported to the AMLCO should be documented (in urgent cases this may follow an initial discussion by telephone). The report should include the full details of the customer and as full a statement as possible of the information giving rise to the suspicion.
8.3.4 The AMLCO should acknowledge receipt of the report and at the same time provide a reminder of the obligation to do nothing that might prejudice enquiries, i.e. “tipping off”. All internal enquiries made in relation to the report, and the reason behind whether or not to submit the report to the authorities, should be documented.
8.3.5 Ongoing communication between the AMLCO and the reporting person/department is important. It is particularly important that the AMLCO is informed of all communication between the investigating officer and the branch concerned at all stages of the investigation.
8.3.6 Records of suspicion should be retained for five years from the date of the transaction records of suspicions which the Bangladesh Bank has advised are of no interest should be retained for a similar period. Records of suspicions that assist with investigations should be retained until the branch is informed by the Bangladesh Bank that they are no longer needed.

8.4 Reporting Procedures
8.4.1 The national reception point for reporting of suspicions by the CAMLCO is:
The General Manager
Anti-Money Laundering Department
Bangladesh Bank
Head Office
Dhaka
8.4.2 The Anti Money Laundering Department of Bangladesh Bank can be contacted during office hours at the following numbers:
Telephone: (02) 7120659 and (02) 7120371
Fax: (02) 9566212
Email: gmanlbb@bangla.net
8.4.3 The use of a standard format in the reporting of suspicious activities is important and all branches are required to use the unusual/suspicious transactions reporting form as per our Secret Circular No. 2 dated 27th July, 2002. Suspicious activity reports should be typed whenever possible or, if the standard layout is followed, generated on word-processing software.
8.4.4 Sufficient information should be disclosed on the suspicious transaction, including the reason for the suspicion, to enable the investigating officer to conduct appropriate enquiries.
8.4.5 Where additional relevant evidence is held which could be made available to the investigating officer, this should be noted on the form.
CHAPTER IX: TRAINING AND AWARENESS
9.1 Statutory Requirements
9.1.1 It is imperative to take appropriate measures to make employees aware of in terms of the provisions under Section 4(Umah):
h policies and procedures to prevent money laundering and for identification, record keeping and internal reporting;
h the legal requirements; and
h to provide relevant employees with training in the recognition and handling of suspicious transactions.

9.2 The Need for Officer Awareness
9.2.1 Officials must be aware of their own personal statutory obligations and that they can be personally liable for failure to report information in accordance with internal procedures. All officers must be trained to co-operate fully and to provide a prompt report of any suspicious transactions. (Circular No. BCD/1771, dated 25.06.2003).
9.2.2 It is, therefore, important that branches introduce comprehensive measures to ensure that all officer and contractually appointed agents are fully aware of their responsibilities.

9.3 Education and Training Programs
9.3.1 All officials should be educated in the process of the “know your customer” requirements for money laundering prevention purposes. The training in this respect should cover not only the need to know the true identity of the customer but also, where a business relationship is being established, the need to know enough about the type of business activities expected in relation to that customer at the outset to know what might constitute suspicious activity at a future date. Relevant officials should be alert to any change in the pattern of a customer’s transactions or circumstances that might constitute criminal activity.

9.4 New Employees
A general appreciation of the background to money laundering, and the subsequent need for reporting any suspicious transactions to the Anti Money Laundering Compliance Officer (AMLCO) should be provided to all new employees who are likely to be dealing with customers or their transactions, irrespective of the level of seniority. They should be made aware of the importance placed on the reporting of suspicious by the organization, that there is a legal requirement to report, and that there is a personal statutory obligation to do so.

9.5 Customer Service/Account Opening Officer/Tellers/Foreign Exchange Dealers
9.5.1 Officials dealing directly with the public are the first point of contact with potential money launderers and their efforts are vital to the organization’s strategy in the fight against money laundering. They must be made aware of their legal responsibilities and should be made aware of the organization’s reporting system for such transactions. Training should be provided on factors that may give rise to suspicions and on the procedures to be adopted when a transaction is deemed to be suspicious.
9.5.2 It is vital that ‘frontline’ officials are made aware of the organization’s policy for dealing with non-regular (walk in) customers particularly where large transactions are involved and the need for extra vigilance in these cases.

9.6 Processing (Back Office) Officer
Those members of employees who receive completed Account Opening, Payment Order/DD/TT/ FDR application forms and cheques for deposit into customer’s account or other investments must receive appropriate training in the processing and verification procedures. Those employees who are in a position to deal with account opening, or to accept new customers must receive the training given to cashiers and other front office officer above. In addition, the need to verify the identity of the customer must be understood, and training should be given in the organization’s account opening and customer/client verification procedures. Such officials should be aware that the offer of suspicious funds or the request to undertake a suspicious transaction may need to be reported to the Anti Money Laundering Compliance Officer whether or not the funds are accepted or the transactions proceeded with and must know what procedures to follow in these circumstances.

9.7 Senior Management/Operations Supervisors and Managers
A higher level of instruction covering all aspects of money laundering procedures should be provided to those with the responsibility for supervising or managing officer. This will include the offences and penalties arising from the Act for non-reporting and for assisting money launderers; internal reporting procedures and the requirements for verification of identity and the retention of records.

9.8 Anti Money Laundering Compliance Officer
In depth training on all aspects of the Money Laundering Legislation, Bangladesh Bank directives and internal policies will be required for the Anti Money Laundering Compliance Officer. In addition, the AMLCO will require extensive instructions on the validation and reporting of suspicious transactions and on the feedback arrangements, and on new trends and patterns of criminal activity.
9.9 Refresher Training
In addition to the above relatively standard requirements, training may have to be tailored to the needs of specialized areas of the institution’s business. It will also be necessary to keep the content of training programs under review and to make arrangements for refresher training at regular intervals i.e. at least annually to ensure that officer does not forget their responsibilities.



Annexure-A

Model Account Opening Form
o Individual
o Current
o Joint
o Savings
o Proprietorship
o Short Term Deposit
o Individual
o Private Foreign Currency Account
o Partnership
o Convertible Taka Account
o Private Limited Company
o Non-Convertible Taka Account
o Public Limited Company
o Private Non-Resident Taka Account
o Ltd. Co. incorporated in BD
o NFCD/RFCD Account
o Ltd. Co. incorporated in overseas

o Association, Clubs, Societies, Trusts etc.

(Please tick (√) appropriately)


The Manager
_______________ Branch

I/We hereby request you to open …………………. account(s) your bank in the currency(s) mentioned below. I/We agree to provide any document requested by the Bank according to the type of Account(s) applied and also confirm that I/We have gone through the Banks Account Conditions which I/We accept entirely and agree to be bound by such terms and conditions as amended and supplemented from time to time.

Title of Account
(In block letter) ......................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................... Account Officer/RM’s Signature: Approver’s Signature: Approver’s Signature: Special Approvals obtained: …………………………………………………………………………………………………………. …………………………………………………………………………………………………………. …………………………………………………………………………………………………………. …………………………………………………………………………………………………………. Complete the profile form for high net worth customers falling under the following criterion: a) New customers whose initial deposit is more than Tk.50 lac (initial means within One month of Account opening) b) Existing customers whose total AUM (Asset under Management) grow to > Tk.50 lac for 3 consecutive months.










List of questions to be used when obtaining source of wealth

KYC REQUIREMENT FOR HIGH NET WORTH CUSTOMERS.
APPENDIX-I



A. Source of wealth

Type of source of wealth:
r Business ownership
r Profession *
r Top executive
r Investments *
r Inheritance
r Other

Instructions: Please refer to the list of questions to be used when obtaining source of wealth
You may need to choose more than one category for a business owner with inherited wealth
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
B. Notes of Face to face meeting with customers.





C. Annual Review of Customer Profile





Profession – e.g. Physician, lawyer, engineer, accountants and sports professional etc.
Investments – Someone who buys and sells assets of any type: real estate, securities, companies, royalties and patents etc.

Prepared by: Account Officer/
Relationship Manager

Name:
Date:
Reviewed by: Branch
Manager/Branch
Operations Head

Name:
Date:



Note: This form will be renewed every year

List of questions to be used when obtaining source of wealth

Wealth Generated From Business Ownership
- Description and nature of the business and its operations
- Ownership type: private or public?
- What kind of company?
- Percent of ownership?
- Estimated sales volume?
- Estimated net income?
- Estimated net worth?
- How long in business?
- How was the business established?
- Other owners or partners (yes/no)?
- Names of other owners or partners?
- Percent owned by other owners or partners?
- Number of employees?
- Number of locations?
- Geographic trade areas of business?
- Other family members in business?
- Significant revenues from government contract or licenses?

Wealth Derived From Being a Top Executive
- Estimate of compensation?
- What does the company do? (for example, manufacturer, service…)
- Position held (for example, president, CFO)
- Length of time with company?
- Area of expertise (for example, finance, production, etc…)
- Publicly or privately owned?
- Client’s past experience (for example, CFO at another company…)

Primary Source of Wealth was Through Inheritance
- In what business was the wealth generated?
- Inherited from whom?
- Type of asset inherited (for example: land, securities, company trusts…)
- When were the assets inherited?
- How much was inherited?
- Percent ownership for a business that is inherited.

Wealth Generated From a Profession (Physician, dentist, lawyer, engineer, entertainer, professional sports…)
- What is the profession, including area of speciality (Ex: arts – singer, construction – engineer)
- Source of wealth (Ex: lawyer who derived wealth from real estate, Dr. running a clinic…)
- Estimate of income

Wealth Generated From Investments
- Where did the source of wealth come from? (for example, invested in shares, bonds, etc.)
- What do they currently invest in? (for example, real estate, stock market…)
- What is the size of the investment?
- Cite notable public transactions if any?
- What is the client’s role in transaction (Ex: takes positions, buy companies, middle man)
- Estimated annual income/capital appreciation?
- How long has the client been an investor?
Annexure-D

Identification of Directors & Authorised Signatories

(Company letterhead)


The Manager Date: ……………….
(Name & address of financial institution)



Sub: Identification of Directors & Authorised signatories


This is to introduce the following directors of the company & authorised signatories of the account(s) of the company maintained with your bank.
Name
Designation
Father’s name
Mother’s name
Date of birth
Nationality
TIN
Present address
Permanent address









































We certify that information provided above is true and correct. Please treat this letter together with duly attested photographs of the above individuals attached herewith on separate sheet, as photo identification document.

Sincerely,


_____________________________ (Company Stamp)
Chairman/Secretary (Name & Seal)




Annexure-E

Explanation to Walk-in/One-off Customers


The AML Circular # 2 requires us to obtain satisfactory evidence of identification of applicants who do not maintain with us for conducting one-off transactions. You are therefore, kindly requested to provide the following details, together with appropriate documentary evidence, before this transaction may proceed.

Thank you for your cooperation.
NAME



Date of birth

Nationality
Father’s name

Mother’s name
ADDRESS



Other Identification
(ID Card number, passport details etc.)


Value of transaction


Date

Signed
Note:
This is an example document which institutions who are regularly engaged in one-off transactions may care to adapt to their own requirements for obtaining verification of identity in accordance with the regulations.








Annexure-F

Example of Potentially Suspicious Transactions

Financial Institutions may wish to made additional enquiries in the following circumstances

BANK TRANSACTIONS

Cash transactions

h Unusually large cash deposits made by an individual or company whose ostensible business activities would normally be generated by cheques and other instruments.

h Substantial increases in cash deposits of any individual or business without apparent cause, especially if such deposits are subsequently transferred within a short period out of the account and/or to a destination not normally associated with the customer.

h Customers who deposit cash by means of numerous credit slips so that the total of each deposit is unremarkable, but the total of all the credits is significant.

h Company accounts whose transactions, both deposits and withdrawals, are denominated by cash rather than the forms of debit and credit normally associated with commercial operations (e.g. cheques, Letters of Credit, Bills of Exchange, etc.).

h Customers who constantly pay in or deposit cash to cover requests for payment order, bankers drafts, money transfers or other negotiable and readily marketable money instruments.

Accounts

h Customers who wish to maintain a number of trustee or client accounts which do not appear consistent with the type of business, including transactions which involve nominee names.

h Customers who have numerous accounts and pay in amounts of cash to each of them in circumstances in which the total of credits would be a large amount.

h Any individual or company whose account shows virtually no normal personal banking or business related activities, but is used to receive or disburse large sums which have no obvious purpose or relationship to the account holder and/or his business (e.g. a substantial increase in turnover on an account).

h Reluctance to provide normal information when opening an account, providing minimal or fictitious information or, when applying to open an account, providing information that is difficult or expensive for the financial institution to verify.

h Customer’s reluctance or refusal to disclose other banking relationships.

h Home address or business location is far removed from the branch where the account is being opened and the purpose of maintaining an account at your branch cannot be adequately explained.

h Reluctance or refusal to provide business financial statements.

h Information provided by the customer in the Transaction Profile does not make sense for the customer’s business.

h A visit to the place of business does not result in a comfortable feeling that the business is in the business they claim to be in.

h Customers who show an apparent disregard for accounts offering more favorable terms.

h Customers who decline to provide information that in normal circumstances would make the customer eligible for credit or for other banking services that would be regarded as valuable.

h Insufficient use of normal banking facilities, e.g. avoidance of high interest rate facilities for large balances.

h Large number of individuals making payments into the same account without an adequate explanation.

International banking/trade finance

h Customer introduced by an overseas branch, affiliate or other bank based in countries where production of drugs or drug trafficking may be prevalent.

h Use of Letters of Credit and other methods of trade finance to move money between countries where such trade is not consistent with the customer’s usual business.

h Customers who make regular and large payments, including wire transactions, that cannot be clearly identified as bona fide transactions to, or receive regular and large payments from: countries which are commonly associated with the production, processing or marketing of drugs; proscribed terrorist organizations; (tax haven countries).

h Building up of large balances, not consistent with the known turnover of the customer’s business, and subsequent transfer to account(s) held in other locations.

Institution employees and agents

h Changes in employee characteristics, e.g. lavish life styles or avoiding taking holidays.

h Changes in employee or agent performance, e.g. the salesmen selling products for cash have a remarkable or unexpected increase in performance.

h Any dealing with an agent where the identity of the ultimate beneficiary or counterpart is undisclosed, contrary to normal procedure for the type of business concerned.

Secured and unsecured lending

h Customers who repay problem loans unexpectedly.

h Request to borrow against assets held by the financial institution or a third party, where the origin of the assets is not known or the assets are inconsistent with the customer’s standing.

h Request by a customer for a financial institution to provide or arrange finance where the source of the customer’s financial contribution to a deal is unclear, particularly where property is involved.

h Customers who unexpectedly repay in part or full a mortgage or other loan in a way inconsistent with their earnings capacity or asset base.

MERCHANT BANKING BUSINESS

New business

h A personal client for whom verification of identity proves unusually difficult and who is reluctant to provide details.

h A corporate/trust client where there are difficulties and delays in obtaining copies of the accounts or other documents of incorporation.

h A client with no discernible reason for using the firm’s service, e.g. clients whose requirements are not in the normal pattern of the institution’s business and could be more easily serviced elsewhere.

h An investor introduced by an overseas bank, affiliate or other investor, when both investor and introducer are based in countries where production of drugs or drug trafficking may be prevalent.

h Any transaction in which the counterparty to the transaction is unknown.

Dealing patterns and abnormal transactions

Dealing patterns

h A large number of security transactions across a number of jurisdictions.

h Transactions not in keeping with the investor’s normal activity, the financial markets in which the investor is active and the business which the investor operates.

h Buying and selling of a security with no discernible purpose or in circumstances which appear unusual, e.g. churning at the client’s request.

h Low-grade securities purchases and sales, with the proceeds used to purchase high grade securities.

h Bearer securities held outside a recognized custodial system.

Abnormal transactions

h A number of transactions by the same counterparty in small amounts of the same security, each purchased for cash and then sold in one transaction, the proceeds being credited to an account different from the original account.

h Any transaction in which the nature, size or frequency appears unusual, e.g. early termination of packaged products at a loss due to front end loading, or early cancellation, especially where cash had been tendered and/or the refund cheque is to a third party.
h Transactions not in keeping with normal practice in the market to which they relate, e.g. with reference to market size and frequency, or at off-market prices.

h Other transactions linked to the transaction in question which could be designed to disguise money and divert it into other forms or to other destinations or beneficiaries.

Settlements

Payment

h A number of transactions by the same counterparty in small amounts of the same security, each purchased for cash and then sold in one transaction.

h Large transaction settlement by cash.

h Payment by way of third party cheque or money transfer where there is a variation between the account holder, the signatory and the prospective investor, must give rise to additional enquiries.

Delivery

h Settlement to be made by way of bearer securities from outside a recognized clearing system.

h Allotment letters for new issues in the name of persons other than the client.

Disposition

h Payment to a third party without any apparent connection with the investor.

h Settlement either by registration or delivery of securities to be made to an unverified third party.

h Abnormal settlement instructions including payment to apparently unconnected parties.


















Annexure-G

Internal Suspicious Activity Report From
Strictly Private & Confidential
To
Anti Money Laundering Compliance Officer
Date:
From
Name (Mr./Ms.)
Branch/Department

Job Title
SAR Ref. No.

Note: This form may be completed in English. For any queries, please contact AMLCO. Please provide full details of the transaction(s) and any other relevant data. Attach copies of relevant documents/transaction notes.

Customer/Business Name

Transaction Date(s)
Account Number(s)



Yes

NoCopies of transaction and
Account details attached
Description of transaction(s). (Nature of transaction, Origin & destination of Transaction etc.)







Source of funds and purpose of transaction (If you can, try to tactfully ask the customer)






Reasons why you think the transaction is suspicious (Give as much details as possible)







Signature of bank staff.

TO BE COMPLETED BY AMLCO.

ACTION TAKEN TO VALIDATE

h Acknowledgement sent to the originator on __________________.

h Reviewed account documentation

h Discuss with the relationship manager/branch manager.

h Other.

AGREED SUSPICIOUS Yes/No

COMMENTS/NOTES OF AMLCO











Signature
AMLCO Date:


























Annexure-H

Internal Control Checklist

Yes/No
Have you carried out a review of processes in your business to identify where money laundering is most likely to occur?

Is this review regularly updated?

Have you established procedures and controls to prevent or detect money laundering?

Is the effectiveness of such controls tested?

Do online or electronic transactions circumvent these controls?

Do your have a comprehensive written policy on money laundering?

Is all staff aware of this policy?

Does your money laundering policy include clear guidelines on accepting corporate hospitality and gifts?

Is all staff aware of their responsibilities with regard to money laundering?

Do they receive regular money laundering training?

Are all members of staff sufficiently capable of identifying suspicious transactions?

Are your systems capable of highlighting suspicious transactions (i.e. those not conforming to usual parameters)?

Do all members of staff know the identity of their Anti Money Laundering Compliance Officer (AMLCO)?

Are your systems capable of providing the AMLCO will all the information required for the Annual Management Report?

Do you thoroughly check and verify the identity of all your clients?

Do you have client accounts in the name of fictitious persons/entities?

Do you know the identity of the beneficial owner of all your corporate clients?

Is this identity verified?

Are all suspicious transactions reported to Bangladesh Bank?




Annexure-I


(The following is an English translation of the act and incorporates its amendment (Act No. 3 of 2003). Strikethrough words mean that these were removed while those in italic mean that these were inserted by the amendment. In case of any dispute the official Bangla versions of the acts shall prevail).


Money Laundering Prevention Act, 2002 (Act No. 7 of 2002)


Whereas it is just and necessary to prepare rules with a view to preventing money laundering, therefore, it is enacted as under:

First Chapter

Introduction

1. Short Title and Introduction
(1) This act will be called as ‘Money Laundering Protirodh (Prevention) Ain (Act), 2002.
(2) This act will be in force on the date to be fixed through Government Gazette;
2. Definition – If nothing is contrary to the subject and reference, in this act –
(Ka) “Illegal means” will mean any means which is not recognized by any Act, Rules or Regulations;
(Kha) “Crime” means any crime under this Act;
(Ga) “Court” means Money Laundering Court”;
(Gha) “Financial Institution” means financial institution defined under Section 2 (Kha) of Financial Institution Act, 1993 (Act No. 27 of 1993);
(Cha) “Court of Session” means Court of Session mentioned in Section 6 of Code of Criminal Procedure;
(Chaa) “Determined” means determined by Rules;
(Ja) “Code of Criminal Procedure” means Code of Criminal Procedure, 1898 (Act V of 1898);
(Jha) “Rule” means rule prepared under this Act;
(Eionh) “Bangladesh Bank” means Bangladesh Bank established under the Bangladesh Bank Order, 1972 (P.O. No. 127 of 1972);
(Ta) “Bank” means the Bank Company defined by Section 5(Na) of Bank Company Ain (Act), 1991 (Act No. 14 of 1991);
(Tha) “Money Laundering” means
(Au) Properties acquired or earned directly or indirectly through illegal means;
(Aa) Illegal transfer, conversion, concealment of location or assistance in the above act of the properties acquired or earned directly or indirectly through legal or illegal means;
(Da) “Properties” means movable or immovable properties of any nature and description;
(Dha) “Supreme Court” means Bangladesh Supreme Court constituted under Paragraph 94 of the constitution of the People’s Republic of Bangladesh;
(Na) “High Court” means the High Court Division of the Supreme Court.


3. Supremacy of the Act – Not withstanding whatever may contain in any other Act in force, the provisions of this Act will remain in force.

Second Chapter

Responsibility and power of Bangladesh Bank in preventing Money Laundering

4. Responsibility of Bangladesh Bank in preventing Money Laundering – The responsibility of Bangladesh Bank will be to prevent and resist crime of money laundering and for resisting such criminal activities –
(Ka) To conduct enquiry about the crime of money laundering;
(Kha) Observe and supervise the activities of banks, financial institutions and other financial institutions engaged in financial activities;
(Ga) To invite statement from the banks, financial institutions and other institutions engaged in financial activities about any matter connected with money laundering;
(Gha) Examination of the statement received under (Ga) above and taking of proper action accordingly;
(Umah) To give training to the staff/officer of the bank, financial institutions and other institutions engaged in financial activities.
(Cha) To perform other work in fulfillment of the objective of this Act.

5. Power of enquiry, etc. –
(1) Bangladesh Bank or any person authorized by Bangladesh Bank can enquire into the crime committed under this Act and other related issues and for such enquiry if it is required to enter into any place the same can be done after following the required system.
(2) In case of enquiry into a matter the power which an Officer Incharge of a Police Station can exercise under the Code of Civil Procedure Bangladesh Bank or any person authorised by Bangladesh Bank will be able to exercise the same power while enquiring into the crime committed under this Act.

Third Chapter

Money Laundering Court

6. Establishment of Money Laundering Court –
(1) In order to fulfill the objective of this act all Courts of Sessions will be regarded as Money Laundering and all Session Judges will be the justice of Money Laundering Court.
(2) Session Judge will settle all cases under this Act himself or he can send the case to any Additional Session Judge under him for settlement.

7. Jurisdiction of the Court –
(1) The court will be able to impose the prescribed punishment for the crime committed under this Act and in applicable cases pass other orders including order for enquiry, confinement, seizure, fine and compensation.
(2) If the crime under other Act is associated with the crime under another Act in such a manner that in order to dispense justice it is necessary to proceed for trial for the both crimes together or cases are to be instituted together, then trial for the crime committed under this Act can be done at the same time under other Act in the same court.
But the condition is this that if money laundering is associated with the schedule of crimes under such Act which is imprisonable for a period less than three years the same will not be treated as a punishment under this Act.
8. Acceptance of the crime for trial etc.
(1) Notwithstanding what is contained in any other laws all crimes under this act will be cognizable for trial under this Act.
(2) All crimes under this act will be non-bailable.
(3) Subject to other provisions of this act, no accused or punishable person will be released on bail, if –
(Ka) No opportunity is given to the complainant party on the application for releasing him on bail.
(Kha) The Court is satisfied that there is reasonable ground to adjust him guilty on the charges brought against him; or
(Ga) The Court is satisfied that the justice will not be hindered if he is released on bail.

9. Application of Code of Civil and Criminal Procedure, etc. –
(1) If nothing otherwise exists in this Act, provisions of the Code of Civil and Criminal Procedures will be applicable as the case may be in case of filing of complain, enquiry, seizure, attachment of property, trial and settlement for the crimes under this Act.
(2) Person conducting cases in the Court on behalf of the complainant will be called as Public Prosecutor.
(3) The Court will be able to order the enquiry officer to do further enquiry on the crime of the cases under trial and in such cases the Court will be able to fix up time limit for submission of the above enquiry report.

10. Legal seizure of property – On the basis of written application from Bangladesh Bank or any person authorised by Bangladesh Bank the Court will issue legal seizure of property to this effect that the property of the accused in whatever condition it may remain will be banned from sale or transfer.

11. Freezing of the property –
(1) On the basis of written application of Bangladesh Bank or person authorised by Bangladesh Bank the Court will issue Freezing Order for the properties of the person who is accused under this Act.
(2) If the Freezing Order is issued as per Sub-section (1) above
(Ka) The Court will publish it in the form of Notification in the Bangladesh Gazette and national daily for information of general public.
(Kha) The concerned property will in no way can be transferred or the concerned property cannot be made encumbered.
(3) In the Freezing Order under this Section, the name of the accused, designation, name of father and mother, address, profession etc. should be mentioned as far as possible.
(4) If the bank account of the accused is under Freezing Order, if nothing contrary is mentioned in the above Order, all receivables of the accused will be credited in the frozen bank account.

12. Appeal – Whatever different may exist in the Code of Criminal Procedures, the party aggrieved by order, judgment or punishment imposed by the court will be able to appeal in the High Court within 30 days of the date of the such order, judgment or punishment.

Fourth Chapter

Crime and Punishment


13. Punishment for Money Laundering –
(1) If any person is engaged Money Laundering in any way he will be regarded as a person who has committed a crime.
(2) The concerned accused for the crime mentioned in Sub-section (1) will be sentenced to imprisonment for at least a period of six months and a maximum of seven years and will be fined for an amount not exceeding double the amount involved in the crime.

14. Punishment for violation of seizure order – If any person violates the seizure order under Section 10 he will be imprisoned for one year maximum or fined for Taka ten thousand maximum or he may be punished with both.

15. Punishment for violation of the freezing order – If any person violates the freezing order under Section 11 he will be imprisoned for one year maximum or fined for Taka five thousand maximum or he may be punished with both.

16. Punishment for divulgation of information –
(1) No person will obstruct the enquiry or divulge information relating to enquiry or divulge information relating to enquiry or relevant other information to other person with a view to casting adverse influence on the enquiry.
(2) If any person violates the provision of Sub-section (1) he will be imprisoned for one year maximum or fined for Taka ten thousand maximum or he may be punished with both.

17. Punishment for obstruction in enquiry –
(1) No person will express his unwillingness without any reasonable ground to assist the enquiry officer in his enquiry activities under this Act.
(2) If any person violates the provision of Sub-section (1) he will be imprisoned for one year maximum or fined for Taka ten thousand maximum or he may be punished with both.

Fifth Chapter

Miscellaneous

18. Agreement with the Foreign Country –
(1) The government may enter into agreement with any foreign country in order to fulfill the objective of this Act.
(2) If any agreement is entered into with a foreign country under Sub-section (1) above, the government will declare the name of such country as the ‘country under agreement’ in order to fulfill the objective of this act by Notification in the Government Gazette.

19. Responsibility of the banks, financial institutions and other institutions engaged in financial activities in preventing and identifying money laundering –
(1) In checking and identifying money laundering banks, financial institutions and other institutions engaged in financial activities –
(Ka) As client of it, it should preserve the correct and full information of all of its clients and in the event of closing of transactions it should preserve records of transactions for at least five years from the date of closure;
(Kha) Will provide the records so preserved as per Sub-section (Ka) above to Bangladesh Bank from time to time on demand;
(Ga) Information regarding abnormal transactions and doubtful transactions which are likely to be related to money laundering should be informed to Bangladesh Bank.
(2) Bangladesh Bank will determine the information to be preserved as per Sub-section (1) and issue Circular or Gazette Notification from time to time.
(3) In the event of failure of providing and preserving the information as mentioned in Sub-section (1) Bangladesh Bank will inform the licensing authority of the defaulting bank, financial institution and other institutions engaged in financial activities so that the concerned authority can take proper action for negligence and failure against the concerned bank, financial institution and other institution engaged in financial activities as per their own rule or provision.
(4) Whatever may contain in Sub-section (3), Bangladesh Bank will be able to impose fine up to a maximum of Taka one lac and a minimum of Taka ten thousand to the defaulting bank, financial institution and other institution engaged in financial activities for failure to preserve and supply information as mentioned in Sub-section (3) and also for negligence.

20. Crime committed by the company etc. –
(1) If the violator of any provision of this act is a company, it will be regarded that each proprietor, director, manager, secretary or any other officer or employee or representative of the company has violated the provision:
But the condition is this that the concerned person will not be responsible for the violation if he can prove that the above violation has been done beyond his knowledge or he has failed to check the violation despite his best effort.
Explanation: - In this section –
(Ka) “Company” will mean any company, statutory body, partnership concern, Association or institution formed with one or more than one person;
(Kha) “Director” will mean any partner or member of the Board of Director in whatever name it is called.
(2) Registration of the company which is engaged in money laundering directly or indirectly will be liable to be cancelled.

21. Power to frame rules. – Government by Notification in Government Gazette will be able to frame rules in order to fulfill the objective of this Act.


Schedule

[Reference – conditions of Section 7(2)]

(Ka) Penal Code, 1860 (XLV of 1860);
(Kha) Arms Act, 1878 (XL of 1878);
(Ga) Foreign Exchange Regulation Act, 1947 (VII of 1947);
(Gha) Anti Corruption Act, 1957 (XXVI of 1957);
(Umah) Special Power Act, 1974 (XIV of 1974);
(Cha) Madak Drabwa Niatran Ain (Drugs Control Act), 1990 (Act No. 20 of 1990);
(Chaa) Nari O Shishu Nirjatan Daman Ain (Women and Children Oppression Prevention Act), 2000 (Act No. 8 of 2000);
(Ja) Aain-sringkhola Bighnokari Aporadh (Druto Bichar) Aain, 2002. (Crimes obstructing law & order (speedy trial) Act), (Act No. 11 of 2002).