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Updated Version- 2013 UPDATED MANUAL (GUIDELINES) ON PREVENTION OF MONEY LAUNDERING AND COMBATING FINANCING ON TERRORISM Corporate Office: Rangs Tower, 68 Purana Paltan,Dhaka-1000,Bangladesh, Phone-088-02 7110177,7110218, SWIFT: BALBBDDH, Web: www.bankasia-bdcom FOCUS GROUP Coordinator: Mr. Aminul Islam Deputy Managing Director & CAMLCO Bank Asia Ltd. Member: Mr. Md Murshid Al-Amin Vice President & DCAMLCO Bank Asia Ltd. Anti Money Laundering Department Corporate Office, Dhaka. Mr. Mehbub Hasan First Vice President Bank Asia Ltd. Anti Money Laundering Department Corporate Office, Dhaka. Ms. Afroza Khatoon First Assistant Vice President Bank Asia Ltd. Anti Money Laundering Department Corporate Office, Dhaka. Preface In response to the growing concern about money laundering and terrorist activities, the International community has acted on many fronts. The United Nations (UN) was the first international organization to undertake significant actions to fight against

money laundering through adopting several conventions and resolutions. Following UN action, the Financial Action Task Force on Money Laundering (FATF) was formed by G-7 countries in 1989 as the first intergovernmental body which has recommended forty recommendations to combat money laundering in 1990. In October 2001, the FATF expanded its mandate to deal with the funding of terrorist acts and terrorist organization, and it took the important step of creating the Eight (later expanded to Nine) Special Recommendations on Terrorist Financing. These 40+9 Recommendations have been endorsed by over 180 countries and are universally recognized as international standard for AML/CFT program. To oversee the implementation of these recommendations in Asia Pacific Region, the Asia/Pacific Group on Money Laundering (APG), FATF-style regional body, was founded in 1997, of which Bangladesh is a founding member. FATF has further extended its mandate to include Proliferation Financing and accumulated

all 40+9 recommendations into 40 Recommendations in February 2012. Bangladesh has got the membership of prestigious Egmont Group on 3rd July, 2013 as its 132nd member. Egmont Group is formed with Financial Intelligence Unit (FIU) of various countries. In line with the international initiatives and standards, Bangladesh has also enacted Money Laundering Prevention Act (MLPA), 2012 (repealing the MLPA, 2009) and Anti Terrorism Act (ATA), 2009 (as amended in 2012). The new acts address all the deficiencies identified in the 2nd Mutual Evaluation of Bangladesh conducted by APG in 2008 to determine the extent of its compliance, with the global standards. Both the Acts have empowered Bangladesh Bank (BB) to perform the anchor role in combating ML&TF through issuing guidance and directives for reporting agencies including Financial Institutions (FIs), as defined in section 2(g) of MLPA, 2012. These Guidance Notes are designed to combat money laundering and terrorist financing. These

Guidance Notes are deemed to be the national best practice for Bank Asia to comply with the Bangladeshs AML/CFT regulation but not constitute a legal interpretation of the said acts. It is advised that the FIs pay due regard to these Guidance Notes in developing responsible programs suitable to their institutions. It is important that the management of the Bank view money laundering and terrorist financing prevention as part of their core risk management strategies and not simply a standalone requirement that is being imposed by the legislation. Combating money laundering and terrorist financing must not be viewed in isolation from an institution‘s other business systems and needs. i An overriding aim of the Guidance Notes is to ensure that information regarding appropriate identification is obtained in relation to the customers of the Bank and their transactions. Furthermore, this is to assist the detection of suspicious transactions and/or activities and also to create an

effective "audit trail" in the event of any subsequent investigation. The Bank is specially advised to be focused and give more emphasis on identification and reporting of suspicious transactions and/or activities. The prevention of money laundering and terrorist financing requires collective effort from all relevant government and private organizations. An effective AML/CFT regime can only be implemented if all the major participants of the financial system comply with the country‘s AML/CFT laws, rules and regulations. Bank Asia as a significant contributor to our financial system should comply with these Guidance Notes as well as all AML/CFT laws, circulars etc. to keep both themselves and the country safe from money laundering and terrorist financing risks. Now Anti Money Laundering Unit shall be considered as Anti Money Laundering Department. Anti Money Laundering Department (Previously AML Unit) has been assigned to make Bank Asia Ltd. as compliant on AML/CFT issues.

ii Table of Contents Particulars Page No. CHAPTER I: BACKGROUND 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 Introduction Definition Money Laundering Why Money Laundering is done Why we must combat Money Laundering Stages of Money Laundering Definition Terrorist Financing The Link Between Money Laundering and Terrorist Financing How Financial Institutional can Combat Money Laundering 1 1 6 6 7 9 10 10 CHAPTER II: INTERNATIONAL INITIATIVES 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 2.14 2.15 2.16 2.17 2.18 2.19 2.121 2.161 2.162 2.163 International Initiatives The United Nations The Vienna Convention The Palermo Convention International Convention for the Suppression of the Financing of Terrorism Security Council Resolution 1267 and Successors Security Council Resolution 1373 The Counter-Terrorism Committee Global Program against Money Laundering The Financial Action Task Force FATF 40+9 Recommendations FATF New Standards The FATF Recommendations Monitoring Members

Progress The NCCT List ICRG The Basel Committee on Banking Supervision Statement of Principles on Money Laundering Basel Core Principles for Banking Customer Due Diligence International Organization of Securities Commissioners The Egmont Group of Financial Intelligence Units Asia Pacific Group on Money Laundering (APG) 12 12 12 12 13 13 14 14 14 14 15 15 16 33 33 34 34 34 35 35 35 36 36 CHAPTER III: NATIONAL INITIATIVES 3.1 National Initiatives 38 CHAPTER IV: VULNERABILITIES OF FINANCIAL INSTITUTIONS 4.1 4.2 4.21 4.22 Vulnerability of the Financial System to Money Laundering Vulnerabilities of Products and Services Factoring Structural Vulnerabilities (i) 41 42 42 43 CHAPTER V: COMPLIANCE REQUIREMENTS UNDER THE LAW & CIRCULAR 5.1 5.11 5.12 5.2 5.3 5.4 5.5 5.21 5.211 5.212 5.213 5.214 Compliance Requirements under The Laws Money Laundering Prevention Act, 2012 Anti Terrorism (Amendment) Act, 2012 Compliance Requirements under Circulars Policies for Prevention of Money

Laundering and Terrorist Financing Customer Identification Politically exposed Persons (PEPs) Appointment and Training Suspicious Transaction Reporting (STR) Targeted Financial Sanctions Self Assessment Independent Testing Procedure 44 44 49 53 53 53 54 54 55 55 55 56 CHAPTER VI: COMPLIANCE PROGRAM 6.1 6.2 6.21 6.22 6.23 6.24 6.25 6.26 6.3 6.31 6.32 6.33 6.4 6.41 6.42 6.43 6.44 6.5 6.51 6.52 6.53 6.54 6.55 6.56 Compliance Program Development of Internal Policies, Procedures and Controls Internal Policy Components of Policy Communicating the Policy Procedures Internal Control Mechanism Establishment of Central Compliance Unit Appointment of AML/CFT Compliance Officer Appointment of Chief AML/CFT Compliance Officer Branch Anti Money Laundering Compliance Officer Responsibilities of Other Employees Employee Training and Awareness Program The Need for Staff Awareness Education and Training Programs General Training Job Specific Training Independent Audit Function Why the audit

function is necessary Why the audit function must be independent Whom they report The ways of performing audit function Internal audit External Auditor 58 58 58 60 60 60 60 61 62 62 64 65 67 67 67 67 68 71 71 71 71 71 71 72 CHAPTER VII: CUSTOMER DUE DILIGENCE 7.1 7.2 7.3 7.31 7.32 7.33 7.4 7.41 7.42 7.421 7.422 7.423 7.424 7.425 Who is a Customer? Know Your Customer Program Know Your Customer (KYC) Procedure Nature of Customer’s Business Identifying Real Person Document is not enough Components of KYC Program Customer Acceptance Policy Customer Identification What Constitutes a Customer’s Identity? Account of Individual Customers Account of Proprietorship Concern Account of Limited Company Account of Partnership Firms (ii) 73 73 74 74 74 74 75 75 76 76 77 78 79 80 7.426 7.427 7.428 7.429 7.4210 7.4211 7.4212 7.4213 7.4214 7.4215 7.4216 7.43 7.44 7.5 7.6 7.7 Accounts of other organizations Joint Accounts No face-to-face contact Appropriateness of documents Change in

address or other details Record keeping Introducer Persons without Standard Identification Documentation Minor Powers of Attorney/ Mandates to Operate Accounts Timing and Duration of Verification Risk Categorization- Based on Activity and KYC Profile Transaction Monitoring Process Card/Internet Banking/Mobile Banking Know Your Customer’s Customer (KYCC) Know Your Employee (KYE) 81 81 81 82 82 82 82 82 83 84 84 84 85 85 85 86 CHAPTER VIII: RECORD KEEPING 8.1 8.2 8.3 8.4 8.5 8.6 Statutory Requirement Retrieval of Records STR and Investigation Training Records Branch Level Record Keeping Sharing of Record/Information of/to a Customer 87 88 89 89 89 90 CHAPTER IX: SUSPICIOUS TRANSACTION REPORT 9.1 9.2 9.3 9.4 9.5 9.6 9.7 9.8 9.9 Definition of STR/SAR Obligations of Such Report Reasons for Reporting Of STR/SAR Identification and Evaluation STR/SAR 9.41 Identification of STR/SAR Risk-Based Approach Reporting Of STR/SAR Tipping Off 9.71 Penalties of Tipping Off “Safe Harbor”

Provisions for Reporting Red Flags or Indicators of STR 9.91 Moving Customers 9.92 Out of market windfalls 9.93 Suspicious Customer Behavior 9.94 Suspicious Customer Identification Circumstances 9.95 Suspicious Cash Transactions 9.96 Suspicious Non-Cash Deposits 9.97 Suspicious Activity in Credit Transactions 9.98 Suspicious Commercial Account Activity 9.99 Suspicious Employee Activity 9.910 Suspicious Activity in an FI Setting List of Abbreviations Annexure (iii) 91 91 91 92 92 94 95 95 95 95 95 95 95 96 96 96 96 97 97 97 97 98 99 Manual on Prevention of Money Laundering and Combating Financing on Terrorism CHAPTER I: BACKGROUND 1.1 Introduction Money Laundering and Terrorist Financing have become very important issue in recent years. Following the 9/11 terrorist attacks in New York and Washington, national and international compliance and regulatory frameworks rapidly expanded to include Combating Money Laundering and the Financing of Terrorism (CFT) as a central focus. It is

widely acknowledged to be an essential component of terrorist activity as terrorists are able to facilitate their activities only if they have the financial resources to do so. The consequences of terrorist activities are terrific and devastating. So money laundering and combating financing of terrorism are very much essential for the economy and also for the security reason of our country. Money Laundering is being employed by launderers worldwide to conceal the proceeds earned from criminal activities. It happens in almost every country in the world, and a single scheme typically involves transferring money through several countries in order to obscure its origins. And the rise of global financial markets makes money laundering easier than ever, making it possible to anonymously deposit "dirty" money in one country and then have it transferred to any other country for use. Money laundering has a major impact on a country‘s economy as a whole; impeding the social,

economic, political, and cultural development of societies worldwide. Both money laundering and terrorist financing can weaken individual financial institution, and they are also a threat to a country‘s overall financial sector reputation. Combating money laundering and terrorist financing is, therefore, a key element in promoting a strong, sound and stable financial sector. The process of money laundering and terrorist financing (ML/TF) is very dynamic and ever evolving. The money launderers and terrorist financers are inventing more and more complicated and sophisticated procedures as well as using new technology for money laundering and terrorist financing. To address these emerging challenges, the global community has taken various initiatives against ML/TF. In accordance with international initiatives, Bangladesh has also acted on many fronts. 1.2 Definition of Money Laundering Money laundering can be defined in a number of ways. But the fundamental concept of Money Laundering

is the process by which criminals attempt to conceal the true origin and ownership of the proceeds of criminal activities. If successful, the money can hide its criminal identity and appear legitimate Illegal arms sales, smuggling, and the activities of organized crime, including for example, drug trafficking and prostitution can generate huge sums. Embezzlement, insider trading, bribery and computer fraud schemes Page 1 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism can also produce large profits and create the incentive to "legitimize" the ill-gotten gains through money laundering. When a criminal activity generates substantial profits, the individual or group involvement must find a way to control the funds without attracting attention to the underlying activity or the persons involved. Criminals do this by disguising the sources, changing the form, or moving the funds to a place where they are less likely to attract

attention. In summary, the money launderer wants to:■ place his/ her money in the financial system, without arousing suspicion; ■ move the money around, often in a series of complex transactions crossing multiple jurisdictions, so it becomes difficult to identify its original source; and ■ then move the money back into the financial and business system, so that it appears as legitimate funds or assets. Most countries subscribe to the following definition which was adopted by the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988) (the Vienna Convention) and the United Nations Convention Against Transnational Organized Crime (2000) (the Palermo Convention): ■ The conversion or transfer of property, knowing that such property is derived from any offense, e.g drug trafficking, or offenses or from an act of participation in such offense or offenses, for the purpose of concealing or disguising the illicit origin of the property or

of assisting any person who is involved in the commission of such an offense or offenses to evade the legal consequences of his/her actions; ■ The concealing or disguising the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from an offense or offenses or from an act of participation in such an offense or offenses, and; ■ The acquisition, possession or use of property, knowing at the time of receipt that such property was derived from an offense or offenses or from an act of participation in such offense or offenses. The Financial Action Task Force (FATF), which is recognized as the international standard setter for Anti Money Laundering (AML) efforts, defines the term "money laundering" succinctly as "the processing of criminal proceeds to disguise their illegal origin" in order to "legitimize" the ill-gotten gains of crime. It is notable that AML related

definition may issue or Act promulgate by our regulator in future to be included in this guide book or manual is considered as approved. As per Anti Money Laundering Act 2012, Section 2 (v), Money Laundering is defined as under: "Money Laundering" means i) knowingly moving, converting, or transferring proceeds of crime or property involved in an offence for the following purposes:1) concealing or disguising the illicit nature, source, location, ownership or control of the proceeds of crime; or Page 2 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 2) assisting any person involved in the commission of the predicate offence to evade the legal consequences of such offence; ii) smuggling money or property earned through legal or illegal means to a foreign country; iii) knowingly transferring or remitting the proceeds of crime to a foreign country or remitting or bringing iv) them into Bangladesh from a foreign country with the

intention of hiding or disguising its illegal source; or v) concluding or attempting to conclude financial transactions in such a manner so as to reporting requirement under this Act may be avoided; vi) converting or moving or transferring property with the intention to instigate or assist for committing a predicate offence; vii) acquiring, possessing or using any property, knowing that such property is the proceeds of a predicate offence; viii) performing such activities so as to the illegal source of the proceeds of crime may be concealed or disguised; ix) participating in, associating with conspiring, attempting, abetting, instigate or counsel to commit any offence(s) mentioned above; “Property” has been defined in Section 2 (bb) of the Money Laundering Prevention Act 2012 as -“Property” means – i) ii) Any type of tangible, intangible, moveable, immoveable, property; or cash, any deed or legal instrument of any form including electronic or digital form giving evidence of

title or evidence of interest related to title in the property which is located within or outside the country. “Predicate Offence” is defined in Section 2 (cc) of the Money Laundering Prevention Act 2012 as follows: “Predicate Offence” means the offences listed below, committed within or outside the country, the money or property derived from which is laundered or attempt to be laundered, namely:1. 2. 3. 4. 5. 6. 7. Page 3 of 99 Corruption and bribery; Counterfeiting currency; Counterfeiting deeds and documents; Extortion; Fraud; Forgery; Illegal trade of firearms; AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 8. Illegal trade in narcotic drugs, psychotropic substances and substances causing intoxication; 9. Illegal trade in stolen and other goods; 10. Kidnapping, illegal restrain and hostage taking; 11. Murder, grievous physical injury; 12. Trafficking of women and children; 13. Black marketing ; 14. Smuggling of domestic and

foreign currency; 15. Theft or robbery or dacoity or piracy or hijacking of aircraft; 16. Human Trafficking; 17. Dowry; 18. Smuggling and offences related to customs and excise duties; 19. Tax related offences; 20. Infringement of intellectual property rights; 21. Terrorism or financing in terrorist activities; 22. Adulteration or the manufacture of goods through infringement of title; 23. Offences relating to the environment; 24. Sexual exploitation; 25. Insider trading and market manipulation- Using price sensitive information relating to the capital market in share transactions before it is published for general information to take advantage of the market and attempting to manipulate the market for personal or institutional gain; 26. Organized crime, and participation in organized criminal groups; 27. Racketeering; and 28. Any other offence(s) declared as predicate offence by Bangladesh Bank, with the approval of the Government, by notification in the official (Bangladesh) Gazette,

for the purpose of this Act. “Smuggling of fund or Property” has been defined in Section 2 (a) of the Money Laundering Prevention Act 2012 as --“Smuggling of fund or Property” means – i) ii) iii) Page 4 of 99 Transfer or holding money or property outside the country in breach of the existing laws in the country; or Refrain from repatriating money or property from abroad in which Bangladesh has an interest and was due to be repatriated; or Not bringing into the country the actual dues from a foreign country, or paying to a foreign country in excess of the actual dues. AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism “Reporting Organization” has been defined in Section 2 (w) of the Money Laundering Prevention Act 2012 as --“Reporting Organization” means – i) Bank; ii) Financial institution; iii) Insurer; iv) Money changer; v) Any company or institution which remits or transfers money or money value; vi) Any other

institution carrying out its business with the approval of Bangladesh Bank; vii) (1) Stock dealer and stock broker, (2) Portfolio manager and merchant banker, (3) Securities Custodian (4) Asset Manager; viii) ix) x) xi) xii) xiii) (1) Non-profit organization (2) Non Governmental Organization (3) Cooperative Society Real estate developer; Dealer in precious metals and/or stones; Trust and Company Service Provider; Lawyer, notary, other legal professionals and accountant; Any other institutions which Bangladesh Bank may notify from time to time with the approval of the Government. “Money value transfer” has been defined in section 2(b) of the Money Laundering Prevention Act 2012 as “Money value transfer” means a financial service in which the service provider receives currency, cheques, other financial instrument (electronic or otherwise) in one location and provides the beneficiary with the equal value in currency or financial instruments or any other means in a different

location. “Proceeds of crime” has been defined in section 2(c) of the Money Laundering Prevention Act 2012 as “Proceeds of crime” means any property obtained or derived, directly or indirectly, from a predicate offence or any such property retained or controlled by anybody. “Cash” has been defined in section 2(m) of the Money Laundering Prevention Act 2012 as – “Cash” means any currency recognized by a country as being the authorized currency for that country, including coins, paper currency, travelers’ cheque, postal notes, money orders, cheques, bank drafts, bearer bonds, letter of credit, bills of exchange, credit card, debit card or promissory notes. “Foreign currency” has been defined in section 2(s) of the Money Laundering Prevention Act 2012 as “Foreign currency” means any foreign exchange defined under section 2 (d) of the foreign exchange regulation Act, 1947 (Act No. VII of 1947) Page 5 of 99 AMLD/2013 Manual on Prevention of Money Laundering

and Combating Financing on Terrorism “Bank” has been defined in section 2(t) of the Money Laundering Prevention Act 2012 as – “Bank” means a bank company defined under section 5 (o) of the Bank Companies Act, 1991 (Act No. XIV of 1991) and it shall also include any other institution designed as a bank under any other law. “Money Changer” has been defined in section 2(u) of the Money Laundering Prevention Act 2012 as“Money Changer” means any person or institution approved by Bangladesh Bank under section 3 of the Foreign Exchange Regulation Act, 1947 (Act No. VII of 1947) for dealing in foreign exchange transactions "Real estate developer" has been defined in section 2(x) of the Money Laundering Prevention Act 2012 as“Real estate developer” means any Real estate developer or its officers or employees or agents defined under section 2(15) of Real Estate Development and Management Act, 2010 (Act No. 48 of 2010) who are engaged in constructing and or buying

and selling of land, house, commercial building and flat etc. "Entity" has been defined in section 2(y) of the Money Laundering Prevention Act 2012 as- “Entity” means any kind of legal entity, statutory body, commercial or non commercial organization, partnership firm, cooperative society or any organization comprising one or more than one person; “Special Judge” has been defined in section 2(z) (dd) of the Money Laundering Prevention Act 2012 as – “Special Judge” means the Special Judge appointed under section 3 of the Criminal Law Amendment Act, 1958 (Act No. XL of 1958) “Stock Dealer and Stock Broker” has been defined in section 2(z) (ee) (1) of the Money Laundering Prevention Act 2012 as – “Stock Dealer and Stock Broker” means an institution defined under rule 2(i) and (j) of the Securities and Exchange Commission (Stock Dealer, Stock Broker and Authorized Representative) Rules 2000. “Portfolio Manager and Merchant Banker” has been defined in

section 2(z) (ee) (2) of the Money Laundering Prevention Act 2012 as – “Portfolio Manager and Merchant Banker” means institution defined under rule 2(f) and (j) of the Securities and Exchange Commission (Merchant Banker and Portfolio Manager) Rules 1996. “Securities Custodian” has been defined in section 2(z) (ee) (3) of the Money Laundering Prevention Act 2012 as – “Securities Custodian” means an institution defined under rule 2(j) of the Securities and Exchange Commission (Security Custodial Service) Rules 2003. “Asset Managers” has been defined in section 2(z) (ee) (4) of the Money Laundering Prevention Act 2012 as – “Asset Managers” means an institution defined under rule 2(s) of the Securities and Exchange Commission (Mutual Fund) Rules 2001. Page 6 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 1.3 Why Money Laundering Is Done First, money represents the lifeblood of the organization/person that

engages in criminal conduct for financial gain because it covers operating expenses and pays for an extravagant lifestyle. To spend money in these ways, criminals must make the money they derived illegally appear legitimate. Second, a trail of money from an offense to criminals can become incriminating evidence. Criminals must obscure or hide the source of their wealth or alternatively disguise ownership or control to ensure that illicit proceeds are not used to prosecute them. Third, the proceeds from crime often 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 Money laundering has potentially devastating economic, security, and social consequences. Money laundering is a vital process to making crime worthwhile. It provides the fuel for drug dealers, smugglers, terrorists, illegal arms

dealers, corrupt public officials, and others to operate and expand their criminal enterprises. This drives up the cost of government due to the need for increased law enforcement and health care expenditures (for example, for treatment of drug addicts) to combat the serious consequences that result. Crime has become increasingly international in scope, and the financial aspects of crime have become more complex due to rapid advances in technology and the globalization of the financial services industry. Money laundering diminishes government tax revenue and therefore indirectly harms honest taxpayers. It also makes government tax collection more difficult. This loss of revenue generally means higher tax rates than would normally be the case if the untaxed proceeds of crime were legitimate. We also pay more taxes for public works expenditures inflated by corruption. And those of us who pay taxes pay more because of those who evade taxes. So we all experience higher costs of living than

we would if financial crime “including money laundering” were prevented. 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 crisis. The loss of credibility and investor confidence, that such crisis can bring, has the potential of destabilizing financial systems, particularly in smaller economies. One of the most serious microeconomic effects of money laundering is felt in the private sector. Money launderers often use front companies, which co-mingle the proceeds of illicit activity with legitimate funds, to hide the ill-gotten gains. These front companies have access to substantial illicit funds, allowing them to subsidize front company products and services at levels well below market rates. This makes it difficult, if not Page 7 of 99 AMLD/2013 Manual on Prevention of

Money Laundering and Combating Financing on Terrorism 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. No one knows exactly how much “dirty” money flows through the world’s financial system every year, but the amounts involved are undoubtedly huge. Among its other negative socioeconomic effects, money laundering transfers economic power from the market, government, and citizens to criminals. Furthermore, the sheer magnitude of the economic power that accrues to criminals from money laundering has a corrupting effect on all elements of society. The social and political costs of laundered money are also serious as laundered money may be used to corrupt national institutions. Bribing of government officials undermines the moral fabric in society, and, by weakening collective ethical standards, corrupts our democratic institutions. When

money laundering goes unchecked, it encourages the underlying criminal activity from which such money is generated. 1.5 Stages of Money Laundering 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 jewelry) 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). There are a number of crimes where the initial proceeds usually take the form of cash that needs to enter the financial system by some means. Bribery, extortion, robbery and street level purchases of drugs are almost always made with cash. These proceeds of crime have to enter the financial system by some means so that it can be converted into a form which can be more easily transformed, concealed or transported. The methods of achieving this are limited only by the ingenuity of the

launderer and these methods have become increasingly sophisticated. Despite the variety of methods employed, money laundering is not a single act but a process accomplished in 3 basic stages which are as follows: • Placement – Physically depositing “cash” into Banks and Non-Bank financial institutions such as currency exchanges; converting “cash” into other financial instruments such as by purchasing monetary instruments (travelers’ checks, payment orders); or using “cash” to purchase expensive items that can be resold. Launderers often seek to deposit cash into Banks and then transfer these funds to Banks in regulated environments as “clean”. Smurfing – a form of Placement where the launderer makes many small cash deposits instead of a large one to evade local regulatory reporting requirements applicable to cash transactions. Launderers intend to avoid the threshold of Cash Transaction for dodging the reporting to Regulatory or competent authority. • Layering

– Separating the proceeds of criminal activity from their source through the use of layers of financial transactions (multiple transfers of funds among financial institutions, early surrender of an annuity Page 8 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism without regard to penalties, cash collateralized loans, L/Cs with false invoices/bills of lading, etc.) to disguise the origin of the funds, disrupt any audit trail, and provide anonymity. Launderers want to move funds around, changing both the form of the funds and their location in order to make it harder for law enforcement authorities to identify “dirty” money. • Integration – Placing the laundered proceeds back into the economy in such a way that they re-enter the financial system as apparently legitimate funds. 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 organisations. The table below provides some typical examples. Placement stage Layering stage Integration stage Cash paid into bank Sale or switch to other forms of Redemption of contract or (sometimes with staff complicity investment. switch to other forms of or mixed with proceeds of investment. legitimate business). Cash exported. Money transferred to assets of False loan repayments or forged legitimate financial institutions. invoices used as cover for laundered money. Cash used to buy high value Telegraphic transfers (often Complex web of transfers (both goods, property or business using fictitious names or funds domestic and international) assets. disguised as proceeds of makes tracing original source of legitimate business). funds virtually impossible. Cash purchase of single Cash deposited in outstation premium life insurance or branches and even overseas ---other investment. banking

system. ---Resale of goods/assets. ---1.6 Definition of Terrorist Financing Terrorist financing can be simply defined as financial support, in any form, of terrorism or of those who encourage, plan, or engage in terrorism. Financing of terrorism generally refers to carrying out transactions involving funds that may or may not be owned by terrorist, or that have been, or are intended to be, used to assist the commission of terrorism. Financing of Terrorism includes:    Page 9 of 99 providing or collecting property for carrying out an act of terrorism; providing services for terrorism purposes; arranging for retention or control of terrorist property; or AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism  dealing with terrorist property. The International Convention for the Suppression of the Financing of Terrorism (1999) under the United Nations defines TF in the following manner: 1) If any person commits an offense by any means,

directly or indirectly, unlawfully and willingly, provides or collects funds with the intention that they should be used or in the knowledge that they are to be used, in full or in part, in order to carry out: a) An act which constitutes an offence within the scope of and as defined in one of the treaties listed in the link given below; or b) Any other act intended to cause death or serious bodily injury to a civilian, or to any other person not taking any active part in the hostilities in a situation of armed conflict, when the purpose of such act, by its nature or context, is to intimidate a population, or to compel a government or an international organization to do or to abstain from doing an act. 2) For an act to constitute an offense set forth in the preceding paragraph 1, it shall not be necessary that the funds were actually used to carry out an offense referred to in said paragraph 1, subparagraph (a) or (b). According to the article 7 of the Anti Terrorism (Amendment) Act,

2012 of Bangladesh, financing of terrorism means: Offences relating to financing terrorist activities – (1) If any person or entity knowingly provides or expresses the intention to provide money, services, material support or any other property to another person or entity and where there are reasonable grounds to believe that the same have been used or may be used in full or partially for any purpose by a terrorist person, entity or group or organization, he or the said entity shall be deemed to have committed the offence of financing terrorist activities. (2) If any person or entity knowingly receives money, services, material support or any other property from another person or entity and where there are reasonable grounds to believe that the same have been used or may be used in full of partially for any purpose by a terrorist person or entity or group or organization, he or the said entity shall be deemed to have committed the offence of financing terrorist activities. (3) If any

person or entity knowingly makes arrangement for money, services, material support or any other property for another person or entity where there are reasonable grounds to believe that the same have been used or may be used in full or partially for any purpose by a terrorist person or entity or group or organization, he or the said entity shall be deemed to have committed the offence of financing terrorist activities. (4) If any person or entity knowingly instigates another person or entity to provide or receive or make arrangement for money, services, material support or any other property in such a manner where there Page 10 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism are reasonable grounds to believe that the same have been used or may be used in full or partially by a terrorist person or entity or group or organization for any purpose, he or the said entity shall be deemed to have committed the offence of financing terrorist

activities. 1.7 The Link between Money Laundering and Terrorist Financing The techniques used to launder money are essentially the same as those used to conceal the sources of, and uses for, terrorist financing. But funds used to support terrorism may originate from legitimate sources, criminal activities, or both. Nonetheless, disguising the source of terrorist financing, regardless of whether the source is of legitimate or of illicit origin, is important. If the source can be concealed, it remains available for future terrorist financing activities. Similarly, it is important for terrorists to conceal the use of the funds so that the financing activity goes undetected. As noted above, a significant difference between money laundering and terrorist financing is that the funds involved may originate from legitimate sources as well as criminal activities. Such legitimate sources may include donations or gifts of cash or other assets to organizations, such as foundations or charities

that, in turn, are utilized to support terrorist activities or terrorist organizations. 1.8 How Financial Institutions can Combat Money Laundering The prevention of laundering the proceeds of crime has become a major priority for all jurisdictions from which financial activities are carried out. 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 procedures by which Banks and other Financial Institutions “know their customer” is not only a principle of good business but is also an essential tool to avoid involvement in money laundering. For the purposes of these guidance notes the term Banks and other Financial Institutions refer to businesses carrying on relevant financial business as defined under the legislation. Thus efforts to combat money laundering largely focus on those points in the process where the launderers activities are more

susceptible to recognition and have therefore to a large extent concentrated on the deposit taking procedures of banks i.e the placement stage Institutions and intermediaries must 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. In complying with the requirements of the Act and in following these Guidance Notes, financial institutions should at all times pay particular attention to the fundamental principle of good business practice - know your customer. Having a sound knowledge of a customers business and pattern of financial transactions and commitments is one of the best methods by which financial institutions and their staff will recognize attempts at money laundering. Page 11 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism CHAPTER II: INTERNATIONAL INITIATIVES 2.1 International

Initiatives In response to the growing concern about money laundering and terrorist activities, the international community has acted on many fronts. This part of this Guidance Notes discusses the various international organizations that are viewed as the international standard setters. It further describes the documents and instrumentalities that have been developed for Anti Money Laundering (AML) and Combating the Financing of Terrorism (CFT) purposes. 2.2 The United Nations The United Nations (UN) was the first international organization to undertake significant action to fight money laundering on a truly world-wide basis. The role of UN is important for several reasons which areFirst, it is the international organization with the broadest range of membership The UN, founded in 1945, has 191 members from all across the world. Second, the UN actively operates a program to fight money laundering; the Global Program against Money Laundering, which is headquartered in Vienna, Austria,

is part of the UN Office of Drugs and Crime (UNODC). Third, perhaps most importantly, the UN has the ability to adopt international treaties or conventions that obligate the ratifying countries to reflect those treaties or conventions in their local laws. In certain cases, the UN Security Council has the authority to bind all member countries through a Security Council Resolution, regardless of other actions on the part of an individual country. 2.3 The Vienna Convention Due to growing concern about increased international drug trafficking and the tremendous amounts of related money entering into financial system, the UN, adopted the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988) known as Vienna Convention, named after the city in which it was signed. The Vienna Convention deals primarily with provisions to fight the illicit drug trade and related law enforcement issues. At present, nearly 169 countries including Bangladesh are

party to the convention. The convention came into force on November 11, 1990 2.4 The Palermo Convention In order to fight against internationally organized crimes, the UN adopted the International Convention against Transnational Organized Crime (2000), named after the city in which it was signed as Palermo Convention. The Palermo Convention specifically obligates each ratifying country to: ■ Criminalize money laundering and include all serious crimes as predicate offenses of money Page 12 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism laundering, whether committed in or outside of the country, and permit the required criminal knowledge or intent to be inferred from objective facts; ■ Establish regulatory regimes to deter and detect all forms of money laundering, including customer identification, record-keeping and reporting of suspicious transactions; ■ Authorize the cooperation and exchange of information among

administrative, regulatory, law enforcement and other authorities, both domestically and internationally, and consider the establishment of a financial intelligence unit to collect, analyze and disseminate information; and ■ Promote international cooperation. This convention has come into force from 29th September 2003, having been signed by 147 countries and ratified by 82 countries. 2.5 International Convention for the Suppression of the Financing of Terrorism The financing of terrorism was an international concern prior to the attacks on the United States on 11 September, 2001. In response to this concern, the UN adopted the International Convention for the Suppression of the Financing of Terrorism (1999). The convention came into force on April 10, 2002, with 132 countries signing the convention and 112 countries ratifying it. The convention requires ratifying states to criminalize terrorism, terrorist organizations and terrorist acts. Under the convention, it is unlawful for any

person to provide or collect funds with the (1) intent that the funds be used for, or (2) knowledge that the funds be used to, carry out any of the acts of terrorism defined in the other specified conventions that are annexed to this convention. 2.6 Security Council Resolution 1267 and Successors The UN Security Council has also acted under Chapter VII of the UN Charter to require member States to freeze the assets of the Taliban, Osama Bin Laden and Al-Qaeda and entities owned or controlled by them, as designated by the "Sanctions Committee" (now called the 1267 Committee). The initial Resolution 1267 of October 15, 1999, dealt with the Taliban and was followed by 1333 of December 19, 2000, on Osama Bin Laden and Al-Qaeda. Later Resolutions established monitoring arrangements (1363 of July 30, 2001), merged the earlier lists (1390 of January 16, 2002), provided some exclusions (1452 of December 20, 2002), and measures to improve implementation (1455 of January 17, 2003). The

1267 Committee issues the list of individuals and entities whose assets are to be frozen and has procedures in place to make additions or deletions to the list on the basis of representations by member States. The most recent list is available on the website of the 1267 Committee Page 13 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 2.7 Security Council Resolution 1373 Unlike an international convention, which requires signing, ratification, and recognition in local law by the UN member country to have the effect of law within that country, a Security Council Resolution passed in response to a threat to international peace and security under Chapter VII of the UN Charter, is binding upon all UN member countries. On September 28, 2001, the UN Security Council adopted Resolution 1373, which obligates countries to criminalize actions to finance terrorism. It further obligates countries to: ■ deny all forms of support for terrorist

groups; ■ suppress the provision of safe haven or support for terrorist, including freeing funds or assets of persons, organizations or entities involved in terrorist acts; ■ prohibit active or passive assistance to terrorists; and ■ cooperate with other countries in criminal investigations and sharing information about planned terrorist acts. 2.8 The Counter-Terrorism Committee As noted above, on September 28, 2001, the UN Security Council adopted a resolution (Resolution 1373) in direct response to the events of September 11, 2001. That resolution obligated all member countries to take specific actions to combat terrorism. The resolution, which is binding upon all member countries, also established the Counter Terrorism Committee (CTC) to monitor the performance of the member countries in building a global capacity against terrorism. Resolution 1373 calls upon all countries to submit a report to the CTC on the steps taken to implement the resolution‘s measures and report

regularly on progress. In this regard, the CTC has asked each country to perform a self-assessment of its existing legislation and mechanism to combat terrorism in relation to the requirements of Resolution 1373. 2.9 Global Program against Money Laundering The UN Global Program against Money Laundering (GPML) is within the UN Office of Drugs and Crime (UNODC). The GPML is a research and assistance project with the goal of increasing the effectiveness of international action against money laundering by offering technical expertise, training and advice to member countries upon request. 2.10 The Financial Action Task Force The Financial Action Task Force on Money Laundering (FATF), formed by G-7 countries in 1989, is an intergovernmental body whose purpose is to develop and promote an international response to combat money laundering. In October, 2001, FATF expanded its mission to include combating the financing of Page 14 of 99 AMLD/2013 Manual on Prevention of Money Laundering and

Combating Financing on Terrorism terrorism. FATF is a policy-making body, which brings together legal, financial and law enforcement experts to achieve national legislation and regulatory AML and CFT reforms. Currently, its membership consists of 34 countries and territories and two regional organizations. 2.11 FATF 40+9 Recommendations FATF adopted a set of 40 recommendations to prevent money laundering. These Forty Recommendations constituted a comprehensive framework for AML and were designed for universal application by countries throughout the world. Although not binding as law upon a country, the Forty Recommendations was widely endorsed by the international community including World Bank and IMF and relevant organizations as the international standard for AML. The Forty Recommendations were initially issued in 1990 and revised in 1996 and 2003 to take account of new developments in money laundering and to reflect developing best practices internationally. To accomplish its

expanded mission of combating financing of terrorism FATF adopted nine Special Recommendations in 2001. 2.12 FATF New Standards FATF Plenary has again revised its recommendations in February 2012. The previous 40+9 Recommendations has been accumulated into 40 (forty) recommendations called the FATF Standards. Proliferation financing has been included in the new standards. There is no special recommendation to address the financing of terrorism. All special recommendations have been merged with the 40 recommendations. FATF is now working on the assessment process under the new standards The following table shows the summary of new standards. Table 1: Summary of new FATF 40 Standards Group Page 15 of 99 Topic Recommendations 1 Policies and Coordination 1-2 2 Money Laundering and Confiscation 3-4 3 Terrorist Financing and Financing of Proliferation 5-8 4 Preventive Measures 9-23 5 Transparency and Beneficial Ownership of Legal Persons and Arrangements 24-25 6 Power and

Responsibilities of Competent Authorities and Other Institutional Measures 26-35 7 International Co-operation 36-40 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 2.121 The FATF Recommendations A. 1. AML/CFT Policies and Coordination Assessing risks and applying a risk-based approach Countries should identify, assess, and understand the money laundering and terrorist financing risks for the country, and should take action, including designating an authority or mechanism to coordinate actions to assess risks, and apply resources, aimed at ensuring the risks are mitigated effectively. Based on that assessment, countries should apply a risk-based approach (RBA) to ensure that measures to prevent or mitigate money laundering and terrorist financing are commensurate with the risks identified. This approach should be an essential foundation to efficient allocation of resources across the Anti Money Laundering and countering the financing of

terrorism (AML/CFT) regime and the implementation of riskbased measures throughout the FATF Recommendations. Where countries identify higher risks, they should ensure that their AML/CFT regime adequately addresses such risks. Where countries identify lower risks, they may decide to allow simplified measures for some of the FATF Recommendations under certain conditions. Countries should require financial institutions and designated non-financial businesses and professions (DNFBPs) to identify, assess and take effective action to mitigate their money laundering and terrorist financing risks. 2. National cooperation and coordination Countries should have national AML/CFT policies, informed by the risks identified, which should be regularly reviewed, and should designate an authority or have a coordination or other mechanism that is responsible for such policies. Countries should ensure that policy-makers, the financial intelligence unit (FIU), law enforcement authorities, supervisors

and other relevant competent authorities, at the policy-making and operational levels, have effective mechanisms in place which enable them to cooperate, and, where appropriate, coordinate domestically with each other concerning the development and implementation of policies and activities to combat money laundering, terrorist financing the financing of proliferation of weapons of mass destruction. B. Money Laundering and Confiscation 3. Money laundering offence Countries should criminalize money laundering on the basis of the Vienna Convention and the Palermo Convention. Countries should apply the crime of money laundering to all serious offences, with a view to including the widest range of predicate offences. Page 16 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 4. Confiscation and provisional measures Countries should adopt measures similar to those set forth in the Vienna Convention, the Palermo Convention, and the

Terrorist Financing Convention, including legislative measures, to enable their competent authorities to freeze or seize and confiscate the following, without prejudicing the rights of bona fide third parties: (a) property laundered, (b) proceeds from, or instrumentalities used in or intended for use in money laundering or predicate offences, (c) property that is the proceeds of, or used in, or intended or allocated for use in, the financing of terrorism, terrorist acts or terrorist organizations, or (d) property of corresponding value. Such measures should include the authority to: (a) identify, trace and evaluate property that is subject to confiscation; (b) carry out provisional measures, such as freezing and seizing, to prevent any dealing, transfer or disposal of such property; (c) take steps that will prevent or void actions that prejudice the country’s ability to freeze or seize or recover property that is subject to confiscation; and (d) take any appropriate investigative

measures. Countries should consider adopting measures that allow such proceeds or instrumentalities to be confiscated without requiring a criminal conviction (non-conviction based confiscation), or which require an offender to demonstrate the lawful origin of the property alleged to be liable to confiscation, to the extent that such a requirement is consistent with the principles of their domestic law. C. Terrorist Financing And Financing of Proliferation 5. Terrorist financing offence Countries should criminalize terrorist financing on the basis of the Terrorist Financing Convention, and should criminalize not only the financing of terrorist acts but also the financing of terrorist organizations and individual terrorists even in the absence of a link to a specific terrorist act or acts. Countries should ensure that such offences are designated as money laundering predicate offences. 6. Targeted financial sanctions related to terrorism and terrorist financing Countries should

implement targeted financial sanctions regimes to comply with United Nations Security Council resolutions relating to the prevention and suppression of terrorism and terrorist financing. The resolutions require countries to freeze without delay the funds or other assets of, and to ensure that no funds or other assets are made available, directly or indirectly, to or for the benefit of, any person or entity either (i) designated by, or under the authority of, the United Nations Security Council under Chapter VII of the Charter of the United Nations, including in accordance with resolution 1267 (1999) and its successor resolutions; or (ii) designated by that country pursuant to resolution 1373 (2001). Page 17 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 7. Targeted financial sanctions related to proliferation Countries should implement targeted financial sanctions to comply with United Nations Security Council resolutions relating

to the prevention, suppression and disruption of proliferation of weapons of mass destruction and it’s financing. These resolutions require countries to freeze without delay the funds or other assets of, and to ensure that no funds and other assets are made available, directly or indirectly, to or for the benefit of, any person or entity designated by, or under the authority of, the United Nations Security Council under Chapter VII of the Charter of the United Nations. 8. Non-profit organizations Countries should review the adequacy of laws and regulations that relate to entities that can be abused for the financing of terrorism. Non-profit organizations are particularly vulnerable, and countries should ensure that they cannot be misused: (a) (b) (c) by terrorist organizations posing as legitimate entities; to exploit legitimate entities as conduits for terrorist financing, including for the purpose of escaping asset-freezing measures; and to conceal or obscure the clandestine

diversion of funds intended for legitimate purposes to terrorist organizations D. Preventive Measures 9. Financial institution secrecy laws Countries should ensure that financial institution secrecy laws do not inhibit implementation of the FATF Recommendations. Customer Due Diligence And Record-Keeping 10. Customer due diligence Financial institutions should be prohibited from keeping anonymous accounts or accounts in obviously fictitious names. Financial institutions should be required to undertake customer due diligence (CDD) measures when: i) establishing business relations; ii) carrying out occasional transactions: (i) above the applicable designated threshold (USD/EUR 15,000); or (ii) that are wire transfers in the circumstances covered by the Interpretive Note to Recommendation 16; Page 18 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism iii) there is a suspicion of money laundering or terrorist financing; or iv) the

financial institution has doubts about the veracity or adequacy of previously obtained customer identification data. The principle that financial institutions should conduct CDD should be set out in law. Each country may determine how it imposes specific CDD obligations, either through law or enforceable means. The CDD measures to be taken are as follows: (a) Identifying the customer and verifying that customer’s identity using reliable, independent source documents, data or information. (b) Identifying the beneficial owner, and taking reasonable measures to verify the identity of the beneficial owner, such that the financial institution is satisfied that it knows who the beneficial owner is. For legal persons and arrangements this should include financial institutions understanding the ownership and control structure of the customer. (c) Understanding and, as appropriate, obtaining information on the purpose and intended nature of the business relationship. (d) Conducting

ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of that relationship to ensure that the transactions being conducted are consistent with the institution’s knowledge of the customer, their business and risk profile, including, where necessary, the source of funds. Financial institutions should be required to apply each of the CDD measures under (a) to (d) above, but should determine the extent of such measures using a risk-based approach (RBA) in accordance with the Interpretive Notes to this Recommendation and to Recommendation 1. Financial institutions should be required to verify the identity of the customer and beneficial owner before or during the course of establishing a business relationship or conducting transactions for occasional customers. Countries may permit financial institutions to complete the verification as soon as reasonably practicable following the establishment of the relationship, where the money

laundering and terrorist financing risks are effectively managed and where this is essential not to interrupt the normal conduct of business. Where the financial institution is unable to comply with the applicable requirements under paragraphs (a) to (d) above (subject to appropriate modification of the extent of the measures on a risk-based approach), it should be required not to open the account, commence business relations or perform the transaction; or should be required to terminate the business relationship; and should consider making a suspicious transactions report in relation to the customer. Page 19 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism These requirements should apply to all new customers, although financial institutions should also apply this Recommendation to existing customers on the basis of materiality and risk, and should conduct due diligence on such existing relationships at appropriate times. 11.

Record-keeping Financial institutions should be required to maintain, for at least five years, all necessary records on transactions, both domestic and international, to enable them to comply swiftly with information requests from the competent authorities. Such records must be sufficient to permit reconstruction of individual transactions (including the amounts and types of currency involved, if any) so as to provide, if necessary, evidence for prosecution of criminal activity. Financial institutions should be required to keep all records obtained through CDD measures (e.g copies or records of official identification documents like passports, identity cards, driving licenses or similar documents), account files and business correspondence, including the results of any analysis undertaken (e.g inquiries to establish the background and purpose of complex, unusual large transactions), for at least five years after the business relationship is ended, or after the date of the occasional

transaction. Financial institutions should be required by law to maintain records on transactions and information obtained through the CDD measures. The CDD information and the transaction records should be available to domestic competent authorities upon appropriate authority. 12. Politically exposed persons Financial institutions should be required, in relation to foreign politically exposed persons (PEPs) (whether as customer or beneficial owner), in addition to performing normal customer due diligence measures, to: (a) have appropriate risk-management systems to determine whether the customer or the beneficial owner is a politically exposed person; (b) obtain senior management approval for establishing (or continuing, for existing customers) such business relationships; (c) take reasonable measures to establish the source of wealth and source of funds; and (d) conduct enhanced ongoing monitoring of the business relationship. Financial institutions should be required to

take reasonable measures to determine whether a customer or beneficial owner is a domestic PEP or a person who is or has been entrusted with a prominent function by an international organization. In cases of a higher risk business relationship with such persons, financial institutions should be required to apply the measures referred to in paragraphs (b), (c) and (d). Page 20 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism The requirements for all types of PEP should also apply to family members or close associates of such PEPs. 13. Correspondent banking Financial institutions should be required, in relation to cross-border correspondent banking and other similar relationships, in addition to performing normal customer due diligence measures, to: (a) gather sufficient information about a respondent institution to understand fully the nature of the respondent’s business and to determine from publicly available information the

reputation of the institution and the quality of supervision, including whether it has been subject to a money laundering or terrorist financing investigation or regulatory action; (b) assess the respondent institution’s AML/CFT controls; (c) obtain approval from senior management before establishing new correspondent relationships; (d) clearly understand the respective responsibilities of each institution; and (e) with respect to “payable-through accounts”, be satisfied that the respondent bank has conducted CDD on the customers having direct access to accounts of the correspondent bank, and that it is able to provide relevant CDD information upon request to the correspondent bank. Financial institutions should be prohibited from entering into, or continuing, a correspondent banking relationship with shell banks. Financial institutions should be required to satisfy themselves that respondent institutions do not permit their accounts to be used by shell banks. 14. Money

or value transfer services Countries should take measures to ensure that natural or legal persons that provide money or value transfer services (MVTS) are licensed or registered, and subject to effective systems for monitoring and ensuring compliance with the relevant measures called for in the FATF Recommendations. Countries should take action to identify natural or legal persons that carry out MVTS without a license or registration, and to apply appropriate sanctions. Any natural or legal person working as an agent should also be licensed or registered by a competent authority, or the MVTS provider should maintain a current list of its agents accessible by competent authorities in the countries in which the MVTS provider and its agents operate. Countries should take measures to ensure that MVTS providers that use agents include them in their AML/CFT programmes and monitor them for compliance with these programmes. Page 21 of 99 AMLD/2013 Manual on Prevention of Money Laundering

and Combating Financing on Terrorism 15. New technologies Countries and financial institutions should identify and assess the money laundering or terrorist financing risks that may arise in relation to (a) the development of new products and new business practices, including new delivery mechanisms, and (b) the use of new or developing technologies for both new and pre-existing products. In the case of financial institutions, such a risk assessment should take place prior to the launch of the new products, business practices or the use of new or developing technologies. They should take appropriate measures to manage and mitigate those risks 16. Wire transfers Countries should ensure that financial institutions include required and accurate originator information, and required beneficiary information, on wire transfers and related messages, and that the information remains with the wire transfer or related message throughout the payment chain. Countries should ensure that financial

institutions monitor wire transfers for the purpose of detecting those which lack required originator and/or beneficiary information, and take appropriate measures. Countries should ensure that, in the context of processing wire transfers, financial institutions take freezing action and should prohibit conducting transactions with designated persons and entities, as per the obligations set out in the relevant United Nations Security Council resolutions, such as resolution 1267 (1999) and its successor resolutions, and resolution 1373(2001), relating to the prevention and suppression of terrorism and terrorist financing. Reliance, Controls and Financial Groups 17. Reliance on third parties Countries may permit financial institutions to rely on third parties to perform elements (a)-(c) of the CDD measures set out in Recommendation 10 or to introduce business, provided that the criteria set out below are met. Where such reliance is permitted, the ultimate responsibility for CDD measures

remains with the financial institution relying on the third party. The criteria that should be met are as follows: (a) A financial institution relying upon a third party should immediately obtain the necessary information concerning elements (a)-(c) of the CDD measures set out in Recommendation 10. (b) Financial institutions should take adequate steps to satisfy themselves that copies of identification data and other relevant documentation relating to the CDD requirements will be made available from the third party upon request without delay. (c) The financial institution should satisfy itself that the third party is regulated, supervised or monitored for, and has measures in place for compliance with, CDD and record-keeping Page 22 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism requirements in line with Recommendations 10 and 11. (d) When determining in which countries the third party that meets the conditions can be based,

countries should have regard to information available on the level of country risk. When a financial institution relies on a third party that is part of the same financial group, and (i) that group applies CDD and record-keeping requirements, in line with Recommendations 10, 11 and 12, and programmes against money laundering and terrorist financing, in accordance with Recommendation 18; and (ii) where the effective implementation of those CDD and record-keeping requirements and AML/CFT programmes is supervised at a group level by a competent authority, then relevant competent authorities may consider that the financial institution applies measures under (b) and (c) above through its group programme, and may decide that (d) is not a necessary precondition to reliance when higher country risk is adequately mitigated by the group AML/CFT policies. 18. Internal controls and foreign branches and subsidiaries Financial institutions should be required to implement programmes against money

laundering and terrorist financing. Financial groups should be required to implement group-wide programmes against money laundering and terrorist financing, including policies and procedures for sharing information within the group for AML/CFT purposes. Financial institutions should be required to ensure that their foreign branches and majority-owned subsidiaries apply AML/CFT measures consistent with the home country requirements implementing the FATF Recommendations through the financial groups’ programmes against money laundering and terrorist financing. 19. Higher-risk countries Financial institutions should be required to apply enhanced due diligence measures to business relationships and transactions with natural and legal persons, and financial institutions, from countries for which this is called for by the FATF. The type of enhanced due diligence measures applied should be effective and proportionate to the risks. Countries should be able to apply appropriate counter

measures when called upon to do so by the FATF. Countries should also be able to apply counter measures independently of any call by the FATF to do so. Such counter measures should be effective and proportionate to the risks Page 23 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism Reporting of Suspicious Transactions 20. Reporting of suspicious transactions If a financial institution suspects or has reasonable grounds to suspect that funds are the proceeds of a criminal activity, or are related to terrorist financing, it should be required, by law, to report promptly its suspicions to the financial intelligence unit (FIU). 21. Tipping-off and confidentiality Financial institutions, their directors, officers and employees should be: (a) protected by law from criminal and civil liability for breach of any restriction on disclosure of information imposed by contract or by any legislative, regulatory or administrative provision, if

they report their suspicions in good faith to the FIU, even if they did not know precisely what the underlying criminal activity was, and regardless of whether illegal activity actually occurred; and (b) prohibited by law from disclosing (“tipping-off”) the fact that a suspicious transaction report (STR) or related information is being filed with the FIU. Designated Non-Financial Businesses and Professions 22. DNFBPs: Customer Due Diligence The customer due diligence and record-keeping requirements set out in Recommendations 10, 11, 12, 15, and 17, apply to designated non-financial businesses and professions (DNFBPs) in the following situations: a) Casinos – when customers engage in financial transactions equal to or above the applicable designated threshold. b) Real estate agents – when they are involved in transactions for their client concerning the buying and selling of real estate. c) Dealers in precious metals and dealers in precious stones – when they engage in any

cash transaction with a customer equal to or above the applicable designated threshold. d) Lawyers, notaries, other independent legal professionals and accountants - when they prepare for or carry out transactions for their client concerning the following activities:  buying and selling of real estate;  managing of client money, securities or other assets;  management of bank, savings or securities accounts; Page 24 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism (e)  organization of contributions for the creation, operation or management of companies;  creation, operation or management of legal persons or arrangements, and buying and selling of business entities. Trust and company service providers - when they prepare for or carry out transactions for a client concerning the following activities:  acting as a formation agent of legal persons;  acting as (or arranging for another person to act as) a

director or secretary of a company, a partner of a partnership, or a similar position in relation to other legal persons;  providing a registered office, business address or accommodation, correspondence or administrative address for a company, a partnership or any other legal person or arrangement;  acting as (or arranging for another person to act as) a trustee of an express trust or performing the equivalent function for another form of legal arrangement;  acting as (or arranging for another person to act as) a nominee shareholder for another person. 23. DNFBPs: Other measures The requirements set out in Recommendations 18 to 21 apply to all designated non-financial businesses and professions, subject to the following qualifications: (a) Lawyers, notaries, other independent legal professionals and accountants should be required to report suspicious transactions when, on behalf of or for a client, they engage in a financial transaction in relation to the activities

described in paragraph (d) of Recommendation 22. Countries are strongly encouraged to extend the reporting requirement to the rest of the professional activities of accountants, including auditing. (b) Dealers in precious metals and dealers in precious stones should be required to report suspicious transactions when they engage in any cash transaction with a customer equal to or above the applicable designated threshold. (c) Page 25 of 99 Trust and company service providers should be required to report suspicious transactions for a client when, on behalf of or for a client, they engage in a transaction in relation to the activities referred to in paragraph (e) of Recommendation 22. AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism E. Transparency and Beneficial Ownership of Legal Persons and Arrangements 24. Transparency and beneficial ownership of legal persons Countries should take measures to prevent the misuse of legal persons for

money laundering or terrorist financing. Countries should ensure that there is adequate, accurate and timely information on the beneficial ownership and control of legal persons that can be obtained or accessed in a timely fashion by competent authorities. In particular, countries that have legal persons that are able to issue bearer shares or bearer share warrants, or which allow nominee shareholders or nominee directors, should take effective measures to ensure that they are not misused for money laundering or terrorist financing. Countries should consider measures to facilitate access to beneficial ownership and control information by financial institutions and DNFBPs undertaking the requirements set out in Recommendations 10 and 22. 25. Transparency and beneficial ownership of legal arrangements Countries should take measures to prevent the misuse of legal arrangements for money laundering or terrorist financing. In particular, countries should ensure that there is adequate,

accurate and timely information on express trusts, including information on the settlor, trustee and beneficiaries that can be obtained or accessed in a timely fashion by competent authorities. Countries should consider measures to facilitate access to beneficial ownership and control information by financial institutions and DNFBPs undertaking the requirements set out in Recommendations 10 and 22. F. Powers and Responsibilities of Competent Authorities, and Other Institutional Measures Regulation and Supervision 26. Regulation and supervision of financial institutions Countries should ensure that financial institutions are subject to adequate regulation and supervision and are effectively implementing the FATF Recommendations. Competent authorities or financial supervisors should take the necessary legal or regulatory measures to prevent criminals or their associates from holding or being the beneficial owner of, a significant or controlling interest, or holding a management

function in, a financial institution. Countries should not approve the establishment, or continued operation, of shell banks. For financial institutions subject to the Core Principles, the regulatory and supervisory measures that apply for prudential purposes, and which are also relevant to money laundering and terrorist financing, should apply in a similar manner for AML/CFT purposes. This should include applying consolidated group supervision for AML/CFT purposes. Other financial institutions should be licensed or registered and adequately regulated, and subject to supervision or monitoring for AML/CFT purposes, having regard to the risk of money Page 26 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism laundering or terrorist financing in that sector. At a minimum, where financial institutions provide a service of money or value transfer, or of money or currency changing they should be licensed or registered, and subject to

effective systems for monitoring and ensuring compliance with national AML/CFT requirements. 27. Powers of supervisors Supervisors should have adequate powers to supervise or monitor, and ensure compliance by, financial institutions with requirements to combat money laundering and terrorist financing including the authority to conduct inspections. They should be authorized to compel production of any information from financial institutions that is relevant to monitoring such compliance, and to impose sanctions, in line with Recommendation 35, for failure to comply with such requirements. Supervisors should have powers to impose a range of disciplinary and financial sanctions, including the power to withdraw, restrict or suspend the financial institution’s license, where applicable. 28. Regulation and supervision of DNFBPs Designated non-financial businesses and professions should be subject to regulatory and supervisory measures as set out below. (a) Casinos should be subject to a

comprehensive regulatory and supervisory regime that ensures that they have effectively implemented the necessary AML/CFT measures. At a minimum: ■ Casinos should be licensed; ■ competent authorities should take the necessary legal or regulatory measures to prevent criminals or their associates from holding, or being the beneficial owner of, a significant or controlling interest, holding a management function in, or being an operator of, a casino; and ■ competent authorities should ensure that casinos are effectively supervised for compliance with AML/CFT requirements. (b) Countries should ensure that the other categories of DNFBPs are subject to effective systems for monitoring and ensuring compliance with AML/CFT requirements. This should be performed on a risk-sensitive basis. This may be performed by (a) a supervisor or (b) by an appropriate selfregulatory body (SRB), provided that such a body can ensure that its members comply with their obligations to combat money

laundering and terrorist financing. The supervisor or SRB should also (a) take the necessary measures to prevent criminals or their associates from being professionally accredited, or holding or being the beneficial owner of a Page 27 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism significant or controlling interest or holding a management function, e.g through evaluating persons on the basis of a “fit and proper” test; and (b) have effective, proportionate, and dissuasive sanctions in line with Recommendation 35 available to deal with failure to comply with AML/CFT requirements. Operational and Law Enforcement 29. Financial intelligence units Countries should establish a financial intelligence unit (FIU) that serves as a national centre for the receipt and analysis of: (a) suspicious transaction reports; and (b) other information relevant to money laundering, associated predicate offences and terrorist financing and for the

dissemination of the results of that analysis. The FIU should be able to obtain additional information from reporting entities, and should have access on a timely basis to the financial, administrative and law enforcement information that it requires to undertake its functions properly. 30. Responsibilities of law enforcement and investigative authorities Countries should ensure that designated law enforcement authorities have responsibility for money laundering and terrorist financing investigations within the framework of national AML/CFT policies. At least in all cases related to major proceeds-generating offences, these designated law enforcement authorities should develop a pro-active parallel financial investigation when pursuing money laundering associated predicate offences and terrorist financing. This should include cases where the associated predicate offence occurs outside their jurisdictions. Countries should ensure that competent authorities have responsibility for

expeditiously identifying tracing and initiating actions to freeze and seize property that is, or may become, subject to confiscation, or is suspected of being proceeds of crime. Countries should also make use, when necessary, of permanent or temporary multi-disciplinary groups specialized in financial or asset investigations. Countries should ensure that, when necessary, cooperative investigations with appropriate component authorities in other countries take place. 31. Powers of law enforcement and investigative authorities When conducting investigations of money laundering, associated predicate offences and terrorist financing, competent authorities should be able to obtain access to all necessary documents and information for use in those investigations, and in prosecutions and related actions. This should include powers to use compulsory measures for the production of records held by financial institutions, DNFBPs and other natural or legal persons, for the search of persons and

premises, for taking witness statements, and for the seizure and obtaining of evidence. Page 28 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism Countries should ensure that competent authorities conducting investigations are able to use a wide range of investigative techniques suitable for the investigation of money laundering, associated predicate offences and terrorist financing. These investigative techniques include: undercover operations, intercepting communications, accessing computer systems and controlled delivery. In addition, countries should have effective mechanisms in place to identify, in a timely manner, whether natural or legal persons hold or control accounts. They should also have mechanisms to ensure that competent authorities have a process to identify assets without prior notification to the owner. When conducting investigations of money laundering, associated predicate offences and terrorist financing, competent

authorities should be able to ask for all relevant information held by the FIU. 32. Cash couriers Countries should have measures in place to detect the physical cross-border transportation of currency and bearer negotiable instruments, including through a declaration system and/or disclosure system. Countries should ensure that their competent authorities have the legal authority to stop or restrain currency or bearer negotiable instruments that are suspected to be related to terrorist financing, money laundering or predicate offences, or that are falsely declared or disclosed. Countries should ensure that effective, proportionate and dissuasive sanctions are available to deal with persons who make false declaration(s) or disclosure(s). In cases where the currency or bearer negotiable instruments are related to terrorist financing, money laundering or predicate offences, countries should also adopt measures, including legislative ones consistent with Recommendation 4, which would

enable the confiscation of such currency or instruments. General Requirements 33. Statistics Countries should maintain comprehensive statistics on matters relevant to the effectiveness and efficiency of their AML/CFT systems. This should include statistics on the STRs received and disseminated; on money laundering and terrorist financing investigations, prosecutions and convictions; on property frozen, seized and confiscated; and on mutual legal assistance or other international requests for cooperation. 34. Guidance and feedback The competent authorities, supervisors and SRBs should establish guidelines, and provide feedback, which will assist financial institutions and designated non-financial businesses and professions in applying national measures to combat money laundering and terrorist financing, and, in particular, in detecting and reporting suspicious transactions. Page 29 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism

Sanctions 35. Sanctions Countries should ensure that there is a range of effective, proportionate and dissuasive sanctions, whether criminal, civil or administrative, available to deal with natural or legal persons covered by Recommendations 6, and 8 to 23 that fail to comply with AML/CFT requirements. Sanctions should be applicable not only to financial institutions and DNFBPs, but also to their directors and senior management. G. 36. International Cooperation International instruments Countries should take immediate steps to become party to and implement fully the Vienna Convention, 1988; the Palermo Convention, 2000; the United Nations Convention against Corruption, 2003; and the Terrorist Financing Convention, 1999. Where applicable, countries are also encouraged to ratify and implement other relevant international conventions, such as the Council of Europe Convention on Cybercrime, 2001; the Inter-American Convention against Terrorism, 2002; and the Council of Europe Convention

on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism, 2005. 37. Mutual legal assistance Countries should rapidly, constructively and effectively provide the widest possible range of mutual legal assistance in relation to money laundering, associated predicate offences and terrorist financing investigations, prosecutions, and related proceedings. Countries should have an adequate legal basis for providing assistance and, where appropriate, should have in place treaties, arrangements or other mechanisms to enhance cooperation. In particular, countries should: (a) Not prohibit, or place unreasonable or unduly restrictive conditions on, the provision of mutual legal assistance. (b) Ensure that they have clear and efficient processes for the timely prioritization and execution of mutual legal assistance requests. Countries should use a central authority, or another established official mechanism, for effective transmission and

execution of requests. To monitor progress on requests, a case management system should be maintained. (c) Not refuse to execute a request for mutual legal assistance on the sole ground that the offence is also considered to involve fiscal matters. (d) Not refuse to execute a request for mutual legal assistance on the grounds that laws require financial institutions to maintain secrecy or confidentiality. (e) Maintain the confidentiality of mutual legal assistance requests they receive and the information Page 30 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism contained in them, subject to fundamental principles of domestic law, in order to protect the integrity of the investigation or inquiry. If the requested country cannot comply with the requirement of confidentiality, it should promptly inform the requesting country. Countries should render mutual legal assistance, notwithstanding the absence of dual criminality, if the

assistance does not involve coercive actions. Countries should consider adopting such measures as may be necessary to enable them to provide a wide scope of assistance in the absence of dual criminality. Where dual criminality is required for mutual legal assistance, that requirement should be deemed to be satisfied regardless of whether both countries place the offence within the same category of offence, or denominate the offence by the same terminology, provided that both countries criminalize the conduct underlying the offence. Countries should ensure that, of the powers and investigative techniques required under Recommendation 31, and any other powers and investigative techniques available to their competent authorities: (a) all those relating to the production, search and seizure of information, documents or evidence (including financial records) from financial institutions or other persons, and the taking of witness statements; and (b) a broad range of other powers and

investigative techniques; are also available for use in response to requests for mutual legal assistance, and, if consistent with their domestic framework, in response to direct requests from foreign judicial or law enforcement authorities to domestic counterparts. To avoid conflicts of jurisdiction, consideration should be given to devising and applying mechanisms for determining the best venue for prosecution of defendants in the interests of justice in cases that are subject to prosecution in more than one country. Countries should, when making mutual legal assistance requests, make best efforts to provide complete factual and legal information that will allow for timely and efficient execution of requests, including any need for urgency, and should send requests using expeditious means. Countries should, before sending requests, make best efforts to ascertain the legal requirements and formalities to obtain assistance. The authorities responsible for mutual legal assistance (e.g a

Central Authority) should be provided with adequate financial, human and technical resources. Countries should have in place processes to ensure that the staff of such authorities maintain high professional standards, including standards concerning confidentiality, and should be of high integrity and be appropriately skilled. Page 31 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 38. Mutual legal assistance: freezing and confiscation Countries should ensure that they have the authority to take expeditious action in response to requests by foreign countries to identify, freeze, seize and confiscate property laundered; proceeds from money laundering, predicate offences and terrorist financing; instrumentalities used in, or intended for use in, the commission of these offences; or property of corresponding value. This authority should include being able to respond to requests made on the basis of non-conviction-based confiscation

proceedings and related provisional measures, unless this is inconsistent with fundamental principles of their domestic law. Countries should also have effective mechanisms for managing such property, instrumentalities or property of corresponding value, and arrangements for coordinating seizure and confiscation proceedings, which should include the sharing of confiscated assets. 39. Extradition Countries should constructively and effectively execute extradition requests in relation to money laundering and terrorist financing, without undue delay. Countries should also take all possible measures to ensure that they do not provide safe havens for individuals charged with the financing of terrorism, terrorist acts or terrorist organizations. In particular, countries should: (a) ensure money laundering and terrorist financing are extraditable offences; (b) ensure that they have clear and efficient processes for the timely execution of extradition requests including prioritization

where appropriate. To monitor progress of requests a case management system should be maintained; (c) not place unreasonable or unduly restrictive conditions on the execution of requests; and (d) ensure they have an adequate legal framework for extradition. Each country should either extradite its own nationals, or, where a country does not do so solely on the grounds of nationality, that country should, at the request of the country seeking extradition, submit the case, without undue delay, to its competent authorities for the purpose of prosecution of the offences set forth in the request. Those authorities should take their decision and conduct their proceedings in the same manner as in the case of any other offence of a serious nature under the domestic law of that country. The countries concerned should cooperate with each other, in particular on procedural and evidentiary aspects, to ensure the efficiency of such prosecutions. Where dual criminality is required for

extradition, that requirement should be deemed to be satisfied regardless of whether both countries place the offence within the same category of offence, or denominate the offence by the same terminology, provided that both countries criminalize the conduct underlying the offence. Consistent with fundamental principles of domestic law, countries should have simplified extradition mechanisms, such as allowing direct transmission of requests for provisional arrests between Page 32 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism appropriate authorities, extraditing persons based only on warrants of arrests or judgments, or introducing a simplified extradition of consenting persons who waive formal extradition proceedings. The authorities responsible for extradition should be provided with adequate financial, human and technical resources. Countries should have in place processes to ensure that the staff of such authorities maintain high

professional standards, including standards concerning confidentiality, and should be of high integrity and be appropriately skilled. 40. Other forms of international cooperation Countries should ensure that their competent authorities can rapidly, constructively and effectively provide the widest range of international cooperation in relation to money laundering, associated predicate offences and terrorist financing. Countries should do so both spontaneously and upon request, and there should be a lawful basis for providing cooperation. Countries should authorize their competent authorities to use the most efficient means to cooperate. Should a competent authority need bilateral or multilateral agreements or arrangements, such as a Memorandum of Understanding (MOU), these should be negotiated and signed in a timely way with the widest range of foreign counterparts. Competent authorities should use clear channels or mechanisms for the effective transmission and execution of requests

for information or other types of assistance. Competent authorities should have clear and efficient processes for the prioritization and timely execution of requests, and for safeguarding the information received. 2.13 Monitoring Members Progress Monitoring the progress of members to comply with the requirements of 40+9 recommendations is facilitated by a two-stage process: self assessments and mutual evaluations. In the self-assessment stage, each member responds to a standard questionnaire, on an annual basis, regarding its implementation of 40+9 recommendations. In the mutual evaluation stage, each member is examined and assessed by experts from other member countries in every five years. The first Mutual Evaluation (ME) of Bangladesh was conducted by a joint team of World Bank and International Monetary Fund in October, 2002 and the report thereof was adopted by the APG in September, 2003. The 2nd Mutual Evaluation of Bangladesh was conducted by an APG team in August, 2008. 2.14

The NCCT List FATF adopted a process of identifying those jurisdictions that serve as obstacles to international cooperation in implementing its recommendations. The process used 25 criteria, which was consistent with 40+9 recommendations, to identify such non-cooperative countries and territories (NCCT‘s) and place them on a publicly available list. NCCT was a process of black listing of non compliant country Considering its massive impact on respective country, the FATF introduced new implementation mechanism known as International Cooperation and Review Group (ICRG). Page 33 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 2.15 ICRG The FATF has set up the International Co-operation Review Group (ICRG) as a new process that is designed to notably engage those jurisdictions which are “unwilling” and pose a real risk to the international financial system. The ICRG process is designed to bind members of FATF and FATF Style

Regional Body (FSRB) that show effective commitment to the standards against those that evade their international obligations. The time and money that one jurisdiction spend on creating an effective system in that country is wasted if a neighbor remains a safe haven for criminals. The ICRG process is focused on specific threats and specific risk in specific countries. If needed, these jurisdictions may be publicly identified by the FATF Plenary The second role of the ICRG is to work with those jurisdictions to convalesce the shortcomings underpinning the judgment of the FATF Plenary. This means there could be a focused follow up process between the ICRG and a specific jurisdiction. If all evaluation reviews and regular follow ups are conducted properly, there should be no duplication or conflict within the FATF family and between the follow up processes. 2.16 The Basel Committee on Banking Supervision The Basel Committee on Banking Supervision (Basel Committee) was formed in 1974 by

the central bank governors of the Group of Ten countries. Individual countries are represented by their central banks, or by the relevant authorities with formal responsibility for prudential supervision of banking where that authority is not the central bank. The committee has no formal international supervisory authority or force of law Rather, it formulates broad supervisory standards and guidelines and recommends statements of best practices on a wide range of bank/financial institution supervisory issues. These standards and guidelines are adopted with the expectation that the appropriate authorities within each country will take all necessary steps to implement them through detailed measures, statutory, regulatory or otherwise, that best suit that country‘s national system. Three of the Basel Committee‘s supervisory standards and guidelines concern money laundering issues. 2.161 Statement of Principles on Money Laundering In 1988, the Basel Committee issued its Statement on

Prevention of Criminal Use of the Banking System for the Purpose of Money Laundering (Statement on Prevention). The Statement on Prevention outlines basic policies and procedures that managements of banks/FIs should undertake to assist in suppressing money laundering. There are essentially four principles contained in the Statement on Prevention: ■ Proper customer identification; ■ High ethical standards and compliance with laws; ■ Cooperation with law enforcement authorities; and ■ Policies and procedures to adhere to the statement. Page 34 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 2.162 Basel Core Principles for Banking In 1997, the Basel Committee issued its Core Principles for Effective Banking Supervision (Core Principles), which provides a comprehensive blueprint for an effective bank supervisory system and covers a wide range of topics. Core Principle 15, one of the 25 Core Principles, deals with money

laundering; it provides: Banking supervisors must determine that banks have adequate policies, practices and procedures in place, including strict “know your customer” rules, that promote high ethical and professional standards in the financial sector and prevent the bank from being used; intentionally or unintentionally, by criminal elements. These “know your customer” or “KYC” policies and procedures are a crucial part of an effective institutional framework for every country. In addition, the Basel Committee issued a “Core Principles Methodology” in 1999, which contains 11 specific criteria and five additional criteria to help assess the adequacy of KYC policies and procedures. These, additional criteria include specific reference to compliance with The Forty Recommendations. 2.163 Customer Due Diligence In October, 2001, the Basel Committee issued an extensive paper on KYC principles, entitled Customer due diligence for banks/FIs (Customer Due Diligence). This paper

was issued in response to noted deficiencies in KYC procedures on a world-wide basis. These KYC standards build upon and provide more specific information on the Statement on Prevention and Core Principle 15. 2.17 International Organization of Securities Commissioners The International Organization of Securities Commissioners (IOSCO) is an organization of securities commissioners and administrators that have day-to-day responsibilities for securities regulation and the administration of securities laws in their respective countries. The current membership of IOSCO is comprised of regulatory bodies from 105 countries. With regard to money laundering, IOSCO passed a “Resolution on Money Laundering” in 1992. Like other international organizations of this type, IOSCO does not have law-making authority. Similar to the Basel Committee and International Association of Insurance Supervisors (IAIS), it relies on its members to implement its recommendations within their respective countries.

Page 35 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 2.18 The Egmont Group of Financial Intelligence Units In 1995, a number of governmental units of different countries commonly known as Financial Intelligence Units (FIUs) began working together and formed the Egmont Group of FIUs (Egmont Group), named after the location of its first meeting at the Egmont-Arenberg Palace in Brussels. The purpose of the group is to provide a forum for FIUs to improve support for each of their national AML programs and to coordinate AML initiatives. This support includes expanding and systematizing the exchange of financial intelligence information, improving expertise and capabilities of personnel, and fostering better communication among FIUs through technology, and helping to develop FIUs worldwide. The mission of the Egmont Group has been expanded in 2004 to include specifically financial intelligence on terrorist financing. To be a member of

the Egmont Group, a country‘s FIU must first meet the Egmont FIU definition, which is “a central, national agency responsible for receiving (and, as permitted, requesting), analyzing and disseminating to the competent authorities, disclosures of financial information: (i) concerning suspected proceeds of crime and potential financing of terrorism, or (ii) required by national regulation, in order to counter money laundering and terrorist financing” Bangladesh FIU applied for membership in the Egmont Group. Bangladesh has got the membership of prestigious Egmont Group, formed with Financial Intelligence Units of various countries which help get global support in fighting against money laundering, terrorist financing and other financial crimes. It will help stop money laundering and terrorist financing It won’t be easy now to launder money abroad through corruption. 2.19 Asia Pacific Group on Money Laundering (APG) The Asia/Pacific Group on Money Laundering (APG), founded in 1997

in Bangkok, Thailand, is an autonomous and collaborative international organization consisting of 40 members and a number of international and regional observers. Some of the key international organizations who participate with, and support, the efforts of the APG in the region include the Financial Action Task Force, International Monetary Fund, World Bank, OECD(Organization for Economic Cooperation and Development), United Nations Office on Drugs and Crime, Asian Development Bank and the Egmont Group of Financial Intelligence Units. APG members and observers are committed to the effective implementation and enforcement of internationally accepted standards against money laundering and the financing of terrorism, in particular the Forty Recommendations of the Financial Action Task Force on Money Laundering and Terrorist Financing. The APG has five key roles: To assess compliance by APG members with the global standards through a robust mutual evaluation program; Page 36 of 99

AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism ■ To coordinate bi-lateral and donor-agency technical assistance and training in the Asia/Pacific region in order to improve compliance by APG members with the global standards; ■ To participate in, and co-operate with, the international anti money laundering network - primarily with the FATF and with other regional Anti Money Laundering groups; ■ To conduct research and analysis into money laundering and terrorist financing trends and methods to better inform APG members of systemic and other associated risks and vulnerabilities; and ■ To contribute to the global policy development of Anti Money Laundering and counter terrorism financing standards by active Associate Membership status in the FATF. The APG also assists its members to establish coordinated domestic systems for reporting and investigating suspicious transaction reports and to develop effective capacities to investigate

and prosecute money laundering and the financing of terrorism offences. Page 37 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism CHAPTER III: NATIONAL INITIATIVES 3.0 National Initiatives In line with international efforts, Bangladesh has also taken many initiatives to prevent money laundering and terrorist financing, considering their severe effects on the country. Some important initiatives are shown below: ■ Bangladesh is a founding member of Asia Pacific Group on Money Laundering (APG) and has been participating annual plenary meeting since 1997. APG is a FATF style regional body that enforces international standards in Asia Pacific region. As a member of APG, Bangladesh is committed to implement FATFs 40 recommendations. Subsequently, Bangladesh, as the first South Asian country, promulgated Money Laundering Prevention Act (MLPA), 2002 which came into force on 30 April, 2002. For exercising the power and shouldering the

responsibilities, as stated in the MLPA, a separate department named Anti Money Laundering Department (AMLD) was established at Bangladesh Bank. ■ To address the shortcomings of the MLPA, 2002 and to meet the international standards Bangladesh enacted Money Laundering Prevention Ordinance (MLPO) in 2008 which was replaced by MLPA, 2009 by the parliament in 2009. To address the deficiencies identified in the Mutual Evaluation Report (MER), Bangladesh has again enacted Money Laundering Prevention Act in February, 2012 repealing MLPA, 2009. ■ To combat terrorism and terrorist financing Bangladesh also enacted Anti Terrorism Act (ATA), 2009. To address the gap identified in the MER, some provisions of ATA 2009 have been amended through enactment of Anti Terrorism (Amendment) Act 2012. ■ Bangladesh has enacted Mutual Assistance in Criminal Matters Act, 2012 to enhance international cooperation on ML/TF and other related offences. ■ In the process of responding to international

concern, Bangladesh Government formed a central and several regional taskforces on 27 January, 2002 to combat money laundering and illegal Hundi activities in Bangladesh. ■ On May 16, 2007 financial intelligence unit (FIU) was established in Bangladesh Bank for receiving, analyzing and disseminating Suspicious Transaction Reports (STRs) related to ML/TF and Cash Transaction Reports (CTRs). As per the provision of MLPA, 2012 AMLD is now working as separate unit in Bangladesh Bank as Bangladesh Financial Intelligence Unit (BFIU). ■ Bangladesh Bank (BB) has already issued Guidance Notes under core risk management titled Guidance Notes on Prevention of Money Laundering for banks. Bangladesh Bank has also issued guidance notes for insurance companies and money changers. ■ Self assessment and independent testing procedure system were introduced for banks on March 24, 2008 to assess their own compliance. Side by side, Bangladesh Bank has also been monitoring the same through a process

called system check inspection. ■ A rigorous Customer Due Diligence (CDD) procedure has been introduced to protect identity theft by Page 38 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism customer through issuance of Uniform Account Opening Form for all banks. It includes standardized Know Your Customer (KYC), Transaction Profile (TP) and Risk Grading of Customer. ■ To facilitate exchange of information and intelligence among FIUs, Bangladesh FIU has already signed 13 (thirteen) MoUs with other FIUs. ■ To provide guidance for effective implementation of regime, a National Coordination Committee headed by the Honorable Finance Minister and a Working Committee headed by the secretary of Bank and Financial Institutions Division of Finance Ministry were formed consisting representatives from all regulatory authorities. ■ Bangladesh Government has developed the National Strategy for Preventing Money Laundering and Combating

Financing of Terrorism 2011-2013. The strategy consists of following 12 (twelve) strategies against 12 (twelve) strategic objectives: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Strengthening the legal framework Enhancing effectiveness of the FIU Enforcing compliance of all reporting agencies Structural improvement and capacity building in tracing out methods, techniques and channels of money laundering and terrorist financing Improving transparency in financial reporting on AML/CFT issues Ensuring transparency in the ownership of legal entities Enhancing financial inclusion Maintaining a comprehensive AML/CFT database Boosting national coordination both at policy and operational levels Developing and maintaining international and regional cooperation on AML/CFT Heightening public awareness Stemming the illicit outflows and inflows of fund ■ Issued a comprehensive circular for banks and non bank financial institutions addressing the following issues:  Definition of Customer for KYC

purpose  Process and timing of Customer Due Diligence(CDD)  Defining and identifying Beneficial Owner  Politically Exposed Persons related issues  Correspondent Banking  Employee screening mechanism  Awareness program for the customer ■ BFIU in cooperation with Anti Corruption Commission has assessed ML/TF risk and vulnerabilities in Bangladesh and drafted the National ML/TF Risk and Vulnerability Assessment Report. ■ Bangladesh has continued its pursuance to get membership of the Egmont Group, the global forum for cooperation from 2008. In this regard, the off-site evaluation has already been conducted by Page 39 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism ■ ■ ■ ■ Malaysia and Thailand as sponsor and cosponsor respectively. Bangladesh has become a member of Egmont Group on 3rd July,2013 a global network of Financial Intelligence Units, which will help the country to combat cross- border money

laundering and potential terrorist financing. Being 132nd member of Egmont Group, Bangladesh will have access to sensitive information on the Egmont Group website. The Bangladesh Bank’s Financial Intelligence Unit will act as the national center for all works. Separate annual conferences for the Chief Anti Money Laundering Compliance Officer (CAMLCO) of Banks, Insurance Companies and Financial Institutions were organized. The Bank and Financial Institutions Division, Ministry of Finance has issued a circular instructing all the related agencies to provide relevant information to Bangladesh Bank. BFIU has continued its effort to develop its IT infrastructure which is necessary for efficient and effective functioning of the unit. In this regard, it has finalized the procurement process of goAML’ software for online reporting and software based analysis of CTRs and STRs. BFIU has established MIS to preserve and update all the information and to generate necessary reports using the

MIS. BFIU has arranged a number of training programs, workshops, seminars and road-shows to create awareness among the staff of reporting organizations, regulatory authorities about related issues. Page 40 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism CHAPTER IV: VULNERABILITIES OF FINANCIAL INSTITUTIONS 4.1 Vulnerability of the Financial System to Money Laundering Money laundering is often thought to be associated solely with banks and money changers. All financial institutions, both banks and non-banks, are susceptible to money laundering activities. Whilst the traditional banking processes of deposit taking, money transfer systems and lending do offer a vital laundering mechanism, particularly in the initial conversion from cash, it should be recognized that products and services offered by other types of financial and non-financial sector businesses are also attractive to the launderer. The sophisticated launderer 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. Certain points of vulnerability have been identified in the laundering process, which the money launderer finds difficult to avoid, and where his activities are therefore more susceptible to being recognized. These are:  entry of cash into the financial system;  cross-border flows of cash; and  Transfers within and from the financial system. Financial institutions should consider the money laundering risks posed by the products and services they offer, particularly where there is no face-to-face contact with the customer, and devise their procedures with due regard to that risk. Although it may not appear obvious that the products might be used for money laundering purposes, vigilance is necessary throughout the financial system to ensure that

weaknesses cannot be exploited. Banks and other Financial Institutions 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. All banks and non-banking financial institutions, as providers of a wide range of money transmission and lending services, are vulnerable to being used in the layering and integration stages of money laundering as well as the placement stage. Electronic funds transfer systems increase the vulnerability by enabling the cash deposits to be switched rapidly between accounts in different names and different jurisdictions. Page 41 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism

However, in addition, banks and non-banking financial institutions, as providers of a wide range of services, are vulnerable to being used in the layering and integration stages. Other loan accounts may be used as part of this process to create complex layers of transactions. Some banks and non-banking financial institutions may additionally be susceptible to the attention of the more sophisticated criminal organizations and their “professional money launderers”. Such organizations, possibly under the disguise of front companies and nominees, may create large scale but false international trading activities in order to move their illicit money from one country to another. They may create the illusion of international trade using false/inflated invoices to generate apparently legitimate international wire transfers, and may use falsified/bogus letters of credit to confuse the trail further. Many of the front companies may even approach their bankers for credit to fund the business

activity. Banks and non-banking financial institutions offering international trade services should be on their guard for laundering by these means. 4.2 Vulnerabilities of Products and Services 4.21 Factoring In international factoring there is a provision that the two firms must be member of Factor Chain International or some association that can ensure the credit worthiness of the firms. In absence of this kind of private sector watchdog in the local factoring, the supplier and the buyer may ally together to legalize their proceeds of crime. Without conducting any bonafide transaction the supplier may get finance from FIs and FIs may get repayment from buyer. FIs may focus on getting repayment without considering the sources of fund which can be taken as an opportunity by the money launderer to place their ill-gotten money. In the under mentioned cases, Money Laundering may be happened occasionally out of usual/valid transactions. These may as under: (a) Lease/Term Loan Finance Front

company can take lease/term loan finance from a financial institution and repay the loan from illegal source, and thus bring illegal money in the formal financial system in absence of proper measures. The firm can also repay the loan amount even before maturity period if they are not asked about the sources of fund. In case of financial or capital lease, the asset purchased with FI‘s financing facility can be sold immediately after repayment of the loan through illegal money and sold proceeds can be shown as legal. So the money launderers and terrorist financer can use this financial instrument for placement and layering of their ill-gotten money. (b) Private Placement of Equity/Securitization of Assets Some FIs offer financing facilities to firms through private placement of equity and securitization of assets. FIs sell those financial instruments to private investors who may take this as an opportunity to Page 42 of 99 AMLD/2013 Manual on Prevention of Money Laundering and

Combating Financing on Terrorism make their money legal. Later the money launderers can sell these instruments and bring their money in the formal financial system. (c) Personal Loan/Car Loan/Home Loan Any person can take personal loan from FIs and repay it by illegally earned money; thus he/she can launder money and bring it in the formal channel. After taking home loan or car loan, money launderers can repay those with their illegally earned money, and later by selling that home/car, they can show the proceeds as legal money. (d) SME/Women Entrepreneur Loan Small, medium and women entrepreneurs can take loan facilities from FIs and in many cases, repayment may be done by the illegally earned money. They even do so only to validate their money by even not utilizing the loan. This way they can bring the illegal money in the financial system (e) Deposit Scheme FIs can sell deposit products with at least a six months maturity period. However, the depositor can encash their deposit money

prior to the maturity date with prior approval from Bangladesh Bank, foregoing interest income. This deposit product may be used as lucrative vehicle to place ill-gotten money in the financial system in absence of strong measures. (f) Loan Backed Money Laundering In the “loan backed” money laundering method, a criminal provides an associate with a specific amount of illegitimate money. The associate then provides a “loan or mortgage” back to the money laundering for the same amount with all the necessary “loan or mortgage” documentation. This creates an illusion that the trafficker‘s funds are legitimate. The scheme is reinforced through “legislatively” scheduled payments made on the loan by the money launderer. 4.22 Structural Vulnerabilities ■ FIs are yet to develop sufficient capacity to verify the identity and source of funds of their clients. ■ The human resources are not skilled and trained enough to trace money laundering and terrorist financing activities.

■ None of the FIs has Anti Money Laundering software to monitor and report transactions of a suspicious nature to the financial intelligence unit of the central bank. Page 43 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism CHAPTER V: COMPLIANCE REQUIREMENTS UNDER THE LAW & CIRCULAR 5.1 Compliance Requirements under The Laws In Bangladesh, compliance requirements for FIs, as reporting organization, are based on Money Laundering Prevention Act (MLPA), 2012, Anti terrorism (Amendment) Act, 2012 and circulars or instructions issued by BFIU. 5.11 Money Laundering Prevention Act, 2012 Under the Section 1. Offence of Money Laundering and Punishment – (as per section 4 of MLPA 2012) (1) For the purpose of this Act, money laundering shall be an offence. (2) Any person who commits the offence of money laundering, or abets or conspires in the commission of the offence of money laundering, shall be punishable with imprisonment for a

minimum period of 4(four) years and not more than 12(twelve) years and in addition to this a fine equivalent to the twice of the value of the property involved in the offence or taka 10(ten) lacs, whichever is greater may be imposed. (3) In addition to any fine or punishment, the court may pass an order to forfeit the property of the convicted person in favor of the State which directly or indirectly involved or related with money laundering or any predicate offences. (4) Any entity which commits an offense under this section shall be punishable with a fine of not less than twice the value of the property or taka 20(twenty) lac whichever is greater and in addition to this the registration of the said entity will be liable to be cancelled. (5) It shall not be a prerequisite to be convicted or sentenced for any predicate offence to pass an order of conviction or sentence for a money laundering crime. 2. Punishment for violation of a freezing or attachment order – (as per section 5 of

MLPA 2012) Any person who violates a freeze order or order of attachment issued pursuant to this Act shall be punishable with an imprisonment for a maximum period of 3 (three) years or with a fine equivalent to the value of the property subject to freeze or attachment, or both. Page 44 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 3. Punishment for divulging information – (as per section 6 of MLPA 2012) (1) No person shall, with an ill motive, divulge any information relating to the investigation or any other related information, to any person, organization or news media. (2) Any person empowered under this Act shall refrain from using, publishing or divulging any information collected, received, retrieved or known by him/herself during the course of employment or appointment by an institution or agent, or after the expiry of any contract of employment or appointment for any purpose other than the purpose of this Act. (3) Whoever

contravenes the provisions contained in sub-sections (1) and (2) shall be punishable by imprisonment of maximum period of 2 (two) years or a fine, not exceeding Tk. 50 (fifty) thousand or both. 4. Punishment for obstruction or non-cooperation in investigation, failure to submit report or obstruction in the supply of information – (as per section 7 of MLPA 2012) (1) Whoever, under this Act – Obstructs or declines to cooperate with any investigation officer carrying out the investigation; or Declines to supply information or submit a report when requested without any reasonable ground; He shall be held to have committed an offence under this Act. (2) Any person found guilty of an offence under sub-section (1) shall be punishable by imprisonment of maximum period of 1 (one) year or with a fine not exceeding Tk. 25 (twenty five) thousand or with both. 5. Punishment for providing false information – (as per section 8 of MLPA 2012) (1) No person shall knowingly provide false

information in any manner regarding the source of fund, self identity, the identity of an account holder or the beneficiary or nominee of an account. Any person who violates the provisions contained in sub-section (1) will be punishable by imprisonment of maximum period of 3 (three) years or a fine not exceeding Tk. 50 (fifty) thousand or both. 6. Powers and Responsibilities of Bangladesh Bank in Preventing and Restraining the Offence of Money Laundering – (as per section 23 of MLPA 2012) (1) For the purposes of this Act Bangladesh Bank shall have the following powers and responsibilities: Page 45 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism (a) analyze or review information related to cash transactions and suspicious transactions received from any reporting organizations and to collect additional information for the purpose of analyzing Cash Transaction Report (CTR) or Suspicious Transaction Report (STR) from reporting

organizations and maintain data on the same and where appropriate provide said information to the relevant law enforcement agencies for taking the necessary actions; (b) ask for any information or obtain a report from reporting organizations with regard to any transaction in which there are reasonable grounds to believe that the transaction involves in money laundering or a predicate offence; (c) issue an order to any reporting organization to suspend or freeze transactions of any account for a period not exceeding 30 (thirty) days if there are reasonable grounds to suspect that any money or property has been deposited into the account through the commission of any offence: Provided that such order may be extended for additional period of 30 (thirty) days up to a maximum of 6 (six) months, if it appears necessary to uncover correct information relating to transactions of the account; (d) Issue from time to time to the reporting organizations any directions necessary for the prevention

of money laundering; (e) monitor whether the reporting organizations have properly submitted information and reports requested by Bangladesh Bank and whether they have duly complied with the directions issued by Bangladesh Bank, and where necessary, carry out on-site inspections of the reporting organizations to ascertain the same; (f) arrange for meetings and seminars including provide the training necessary for the purpose of ensuring proper implementation of this Act, to officers and staff of any organization or institution at the discretion of Bangladesh Bank, including reporting organizations; (g) carry out any other functions necessary to fulfill the purpose of this Act. (2) Provide with the information, if not obliged otherwise by the existing laws or any other cause, to the investigating organization if requested by them for information related to money laundering or suspicious transaction investigation. Page 46 of 99 AMLD/2013 Manual on Prevention of Money Laundering and

Combating Financing on Terrorism (3) If any reporting organization fails to provide requested information timely pursuant to this Section, Bangladesh Bank may impose fine such organization Tk. 10 (ten) thousand per day and up to a maximum of Tk. 5 (five) lacs If an organization is fined more than 3 times in a financial year, Bangladesh Bank may suspend the registration or license with a purpose to close the operation of that organization or any of its branches/service centers/booths/agents, within Bangladesh or where appropriate, shall inform the registration or licensing authority about the subject matter so that the relevant authority may take appropriate action against the said organization (4) If any reporting organization provides false information or statement requested pursuant to this Section, Bangladesh Bank may impose fine to such organization not less than Tk. 20 (twenty) thousand but not more than Tk. 5 (five) lacs If an organization is fined more than 3 times in a

financial year, Bangladesh Bank may suspend the registration or license with a purpose to close the operation of that organization or any of its branches/service centers/booths/agents, within Bangladesh or where appropriate, shall inform the registration or licensing authority about the subject matter so that the relevant authority may take appropriate action against the said organization (5) If any reporting organization fails to comply with any instruction given by Bangladesh Bank pursuant to this Act, Bangladesh Bank may fine such organization Tk. 10 (ten) thousand per day and up to maximum Tk. 5 (five) lacs for each such non compliance If an organization is fined more than 3 times in a financial year, Bangladesh Bank may suspend the registration or license with a purpose to close the operation of that organization or any of its branches/service centers/booths/agents, within Bangladesh or where appropriate, shall inform the registration or licensing authority about the subject

matter so that the relevant authority may take appropriate action against the said organization. (6) If any reporting organization fails to comply with the freeze order or suspension order of transaction given by Bangladesh Bank under sub section 1(c), Bangladesh Bank may fine such organization not less than the balance held on that account but not more than twice of the balance at the time of issuance the order. (7) If any person or Reporting Organization fails to pay any fine imposed by Bangladesh Bank under sections 23 and 25 of this Act, Bangladesh Bank may recover the amount from accounts maintained in the name of the relevant person, entity or reporting organization in any bank or financial institution or Bangladesh Bank. In this regard if any amount of the fine remains unrealized Bangladesh Bank may make an application before the court for recovery and the court may pass any order which it deems fit. (8) If any reporting organization is fined under sub-sections 3, 4, 5 and 6,

Bangladesh Bank may impose a fine upon the responsible owner, director, employees and officials or persons employed on a contractual basis of that reporting organization, not less than Tk. 10 (ten) Page 47 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism thousand and a maximum up to Tk. 5 (five) lacs and where necessary may direct the relevant organization to take necessary administrative actions. 7. Responsibilities of Reporting Organizations in Preventing the Offence of Money Laundering – (as per section 25 of MLPA 2012) (1) Reporting Organizations shall have the following responsibilities in the prevention of money laundering: (a) maintain complete and correct information with regard to the identity of its customers during the operation of their accounts; (b) in case of closed account of any customer, keep previous records of transactions of such account for at least 5(five) years from the date of closure; (c) provide the

information maintained under sub-sections (a) and (b) to Bangladesh Bank from time to time, as requested; (d) if any doubtful transaction or attempt of such transaction as defined under 2(n) is observed by reporting organization, it shall be reported as Suspicious Transaction Report (STR) to the Bangladesh Bank proactively and immediately. (2) If any reporting organization violates the provisions contained in sub-section (1), Bangladesh Bank may: (a) Impose a fine on the said reporting organization of a minimum of Tk. 50 (fifty) thousand and up to a maximum of Tk. 25 (twenty-five) lacs; and (b) Cancel the license or the authorization for carrying out commercial activities of the said Organization or any of its branches/service centers/booths/agents, in addition to the fine mentioned in clause (a), and where appropriate, shall inform the registration or licensing or authority about the subject matter so that the relevant authority may take appropriate action against the said

Organization (3) Bangladesh Bank shall collect the sum of fine received under sub-section (2) under manner determined by it and the sum received shall be deposited into the State Treasury. Page 48 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 8. Offences Committed by an Entity – (as per section 27 of MLPA 2012) (1) If any offence under this Act is committed by an entity, every proprietor, director, manager, secretary or any other officer, staff or representative of the said entity who is directly involved in the offence shall be deemed to be guilty of the offence, unless he is able to prove that the said offence has been committed without his knowledge or he took steps to prevent the commission of the said offence. Explanation – In this section – “Director” means any partner or the Board of Directors, by whatever name it is called; it also means its member. 5.12 Anti terrorism (Amendment) Act, 2012 Under the Section1.

Offences relating to financing for terrorist activities – (as per section 7 of ATA 2012) (1) If any person or entity knowingly supplies or expresses the intention to supply money, service, material support or any other property to another person or entity and where there are reasonable grounds to believe that the full or partial amount of the same have been used or may be used for any purpose by an individual terrorist, terrorist entity or terrorist group or terrorist organization then he or she or the said entity shall be treated committing the offence of financing for terrorist activities. (2) If any person or entity knowingly receives money, services, material support or any other property from another person or entity and where there are reasonable grounds to believe that full or partial amount of the same have been used or may be used for any purpose by an individual terrorist, terrorist entity or terrorist group or terrorist organization, then he or she or the said entity shall

be treated committing the offence of financing for terrorist activities. (3) If any person or entity knowingly makes arrangements for collecting money, services, material support or any other property for another person or entity and where there are reasonable grounds to believe that the full or the partial amount of the same have been used or may be used for any purpose by an individual terrorist, terrorist entity or terrorist group or terrorist organization then he or she or the said entity will be treated committing the offence of financing for terrorist activities. (4) If any person or entity knowingly instigate in such a manner, another person or entity to supply, receive, or arrange money, services, material support or any other property and where Page 49 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism there are reasonable grounds to believe that the full or the partial amount of the same have been used or may be used for any

purpose by an individual terrorist, terrorist entity or terrorist group or terrorist organization then he or she or the said entity will be treated committing the offence of financing for terrorist activities. (5) If any person is found guilty of any of the offences set out in sub-sections (1) to (4), that person will be sentenced to imprisonment for a term between a maximum of twenty and a minimum of four years, and in addition to this a fine may be imposed not less than the greater of twice the value of the property involved with the offence or taka 10(ten) lac. (6) (1) If any entity is found guilty of any of the offences set out in sub-sections (1) to (4), steps may be taken under section 18 and in addition to this a fine may be imposed not less than the greater of thrice the value of the property involved with the offence or taka 50(fifty) lac ; and (2) The head of such entity, Chairman, Managing Director, Chief Executive Officer whatever may be called by shall be punished with an

imprisonment of a term up to maximum of 20 and a minimum of 4 years and in addition to this a fine may be imposed the greater of twice the value of the property involved with the offence or taka 20(twenty) lac unless he is able to prove that the said offence was committed without his knowledge or he had tried utmost to prevent the commission of the said offence. 2. Powers of Bangladesh Bank – (as per section 15 of ATA 2012) (1) Bangladesh Bank may take the necessary steps to prevent and identify any transactions carried out through any reporting organization for the purpose of committing any offence under this Act, and for this purpose, it will have the following powers and authority – (a) Call for a report relating to any suspicious transactions from any reporting organization, (b) Provide the reports received under sub-section (a) to the respective law enforcement agencies for taking necessary steps or, where applicable, provide it to the foreign law enforcement agencies upon

their request or, exchange information relating to the report with the foreign law enforcement agencies. (c) Collect and preserve of all statistics and records; (d) Create and maintain a database containing the reports of all suspicious transactions; (e) Analyze reports relating to suspicious transactions; Page 50 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism (f) If there are reasonable grounds to suspect that any transaction is connected to terrorist activities issue an written order to the respective reporting organization to suspend or freeze transactions in the relevant account for a period not exceeding 30(thirty) days. Such order may be extended for additional periods of 30 (thirty) days up to a maximum of 6 (six) months, if it appears necessary to uncover correct information relating to transactions of the account; (g) Monitor and supervise the activities of reporting organizations; (h) Give directions to reporting

organizations to take preventive steps to combat the financing for terrorist activities; (i) Inspect reporting organizations for the purpose of identification of suspicious transactions connected to financing for terrorist activities; and (j) Provide training to officers and employees of reporting organizations for the purpose of identification and prevention of suspicious transactions connected to financing for terrorist activities. (2) Bangladesh Bank, on identification of a reporting organization or its customer as being involved in a suspicious transaction connected to financing for terrorist activities, shall inform the same to the relevant law enforcement agency and provide all necessary cooperation to the said law enforcement agency to facilitate their inquiries and investigations into the matter. (3) In case of offences organized in other countries under trial, Bangladesh Bank shall take steps to seize the accounts of any person or entity pursuant to any international, regional

or bilateral contract, UN conventions or respective resolutions of UN Security Council ratified by the government (4) The fund seized under subsection (3) shall be subject to disposal by the respective court pursuant to the respective contracts, conventions or respective resolutions of UN Security Council. (5) In order to perform the responsibilities set out in subsections (1) to (3), governmental, semi-governmental, autonomous bodies shall provide requested information or in certain cases spontaneously provide information to the Bangladesh Financial Intelligence Unit. Page 51 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism (6) The Bangladesh Financial Intelligence Unit on demand or in certain cases spontaneously provide information relating to terrorist activities or the financing for terrorist activities to the Financial Intelligence Units of other countries. (7) For the purpose of investigation relating to financing for terrorism

law enforcement agencies shall have the right to access any document or file of any bank as per the following conditions: (a) with an order from an appropriate court or tribunal; (b) with the approval of Bangladesh Bank. 3. Duties of Reporting Organizations – (as per section 16 of ATA 2012) (1) Each reporting organization shall take necessary measures, exercising appropriate caution and responsibility, to prevent and identify financial transactions through them connected to any offence committed under this act and if any suspicious transaction is identified, shall spontaneously report it to the Bangladesh Bank without any delay. (2) The Board of Directors, or in the absence of the Board of Directors the Chief Executive Officer or whatever may be called by, of each reporting organization shall approve and issue directions regarding the duties of its officers, and will ascertain whether the directions issued by Bangladesh Bank under section 15, which are applicable to the reporting

organizations, have been complied with. (3) If any reporting organization fails to comply with the directions issued by Bangladesh Bank under section 15 or knowingly provide any wrong information or false information or statement, the said reporting organization shall be liable to pay a fine determined and directed by Bangladesh Bank, not exceeding Taka 10 (ten) lacs and Bangladesh Bank may suspend the registration or license with a purpose to close the operation of the said agency/organization or any branch, service centre, booth or agent of that organization within Bangladesh or where applicable, shall inform the registration/licensing authority about the subject matter to take appropriate action against the organization. (4) If any Reporting Organization fails to pay any fine imposed by Bangladesh Bank under sub sections 3 of this Act, Bangladesh Bank may recover the amount from the reporting organizations by debiting their accounts maintained in any bank or financial institution or

Bangladesh Bank. In this regard if any amount of the fine remains unrealized Bangladesh Bank may make an application before the relevant court for recovery. Page 52 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 5.2 Compliance Requirements under Circulars 5.21 Policies for Prevention of Money Laundering and Terrorist Financing In pursuance of section 16(2) of Anti terrorism (Amendment) Act, 2012, and Anti Money Laundering Department‘s letter dated 04.072006, all FIs must have their own policy manual approved by their Board of Directors/topmost committee to prevent money laundering and terrorist financing. This policy manual must be in conformity with international standard and laws and regulations in force in Bangladesh. FIs shall from time to time review and confirm the meticulous compliance of the circulars issued by Bangladesh Bank. To implement the policy manual and compliance of instructions of Bangladesh Bank, every FI must

have to designate one high level officer as Chief Anti Money Laundering Compliance Officer (CAMLCO) in the Central Compliance Unit (CCU) and one officer as Branch Anti Money Laundering Compliance Officer (BAMLCO) in the branch level. Financial Institutions shall not open or maintain numbered or anonymous account. 5.211 Customer Identification It is mandatory to collect and verify the correct and complete identification of customers to prevent money laundering and terrorist financing and to keep the financial sector free from risks. To protect FIs from risks of money laundering or/and terrorist financing by customers willful or unwilling activities, the Money Laundering Prevention Policy Manual shall clearly state how to conduct Customer Due Diligence at different stages such as: ■ while establishing relationship with the customer; ■ while conducting financial transaction with the existing customer; To be sure about the customer‘s identity and underlying purpose of establishing

relationship with the institution, each institution shall collect adequate information up to its satisfaction. If a person operates an account on behalf of the customer, the concerned financial institution must satisfy itself that the person has due authorization to operate. Correct and complete information of the person, operating the account, is to be collected. Legal status and accuracy of information of the operators are to be ascertained in case of the accounts operated by trustee and professional intermediaries (such as lawyers/law firm, chartered accountants, etc). While establishing and maintaining business relationship and conducting financial transaction with a person (including legal representative, financial institution or any other institution) of the countries and territories that do not meet international standard in combating money laundering (such as the Page 53 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism

countries and territories listed as high risk country in FATF‘s public statements) enhanced due diligence shall have to be ensured. The identity of the beneficial owner of the account shall have to be confirmed on the basis of the information obtained from reliable sources up to the satisfaction of the institution. Moreover, FIs have to do the followings: ■ Complete and correct information of identity of the persons besides the customer, shall have to be collected and preserved if a customer operate an account on behalf of another person in his/her own name. ■ The controller or the owner of the customer shall have to be identified. ■ Complete and correct information of identity of the beneficial owners shall have to be collected and preserved. For the purpose of this subsection, a person will be treated as a beneficial owner if : a) he has controlling share of a company or/and b) hold 20% or more shares of a company. 5.212 Politically exposed Persons (PEPs) While opening and/or

operating account of Politically Exposed Persons (PEPs) enhanced due diligence shall have to be exercised. Following instructions shall have to be followed to ensure Enhanced Due Diligence: ■ a risk management system shall have to be introduced to identify risks associated with the accounts opening and operating of PEPs; ■ take reasonable measures to establish the source of wealth and source of funds; ■ ongoing monitoring of the transactions have to be conducted; and ■ the FIs should observe all formalities as detailed in Guidelines for Foreign Exchange Transactions while opening accounts of non-residents; All instructions as detailed for PEPs shall be equally applicable if business relationship is established with family members and close associates of these persons who may pose reputational risk to the FI. The above instructions shall also be applicable to customers or beneficial owners who become PEPs after business relationship have been established. 5.213 Appointment and

Training Employee Screening: One of the major purposes of combating money laundering and terrorist financing activities is to protect the FIs from risks arising out of money laundering and terrorist Page 54 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism financing. To meet this objective, FIs shall have to undertake proper screening mechanism in their different appointment procedures so that they do not face money laundering and terrorist financing risks by any of their staff. Training for the officials: To ensure proper compliance of ML/TF activities each FI shall arrange suitable training for their officials. Education and training for customers: Financial Institutions shall respond to customers on different matters including KYC. Financial Institutions shall time to time distribute leaflets among customers to make them aware about money laundering and terrorist financing and also arrange to stick posters in every branch at a

visible place. 5.214 Suspicious Transaction Reporting (STR) According to the provision of section 25 (1) (d) of MLPA, 2012, the FIs have to report Bangladesh Bank proactively and immediately, facts on suspicious, unusual or doubtful transactions likely to be related to money laundering. Bangladesh Bank has the power to call STR from FIs related to financing of terrorism according to section 15(a) of Anti terrorism (Amendment) Act, 2012. 5.3 Targeted Financial Sanctions United Nations Security Council Resolution 1267 and 1373 have been adopted under Article VII of UNSCR charter, which means these resolutions are obligatory for every jurisdiction. BFIU has instructed all banks and FIs to take necessary action on UNSCR 1267 and 1373 (targeted financial sanctions).To comply with this direction FI should consult the UN sanction list regularly and if find any account with it, FI should inform BFIU immediately. 5.4 Self Assessment As per AML circular 15, Branch (es) shall assess them

quarterly by its own and submit their report to Internal Control and Compliance Department with a copy to Central Compliance Unit (CCU), AMLD. Then CCU, AMLD of each FI would prepare half yearly self assessment procedure that will assume how effectively the FI‘s AML/CFT program is working. This procedure enables management to identify areas of risk or to assess the need for additional control mechanisms. The self-assessment should conclude with a report documenting the work performed, how it was controlled/ supervised and the resulting findings, conclusions and recommendations. The self assessment should advise management whether the internal procedures and statutory obligations of the FI have been properly discharged. Each branch will assess its AML/CFT activities covering the following areas on quarterly basis and submit the report to CCU within next 20 days of the following month: ■ The percentage of officers/employees that received official training on AML/CFT; Page 55 of 99

AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism ■ The awareness of the officers/employees about the internal AML/CFT policies, procedures and programs, and Bangladesh Bank’s instructions and guidelines; ■ The arrangement of AML/CFT related meeting on regular interval; ■ The effectiveness of the customer identification during opening an individual, corporate and other account; ■ The risk categorization of customers by the branch; ■ Regular update of customer profile upon reassessment; ■ The monitoring of customers‘ transactions with their declared TP after categorizing the customers based on risk or transactions over specific limit; ■ Identification of Suspicious Transaction Reports (STRs); ■ The maintenance of a separate file containing MLPA, Circulars, Training Records, Reports and other AML related documents and distribution of those among all employees; ■ The measures taken by the branch during opening of account of

PEPs; ■ Consideration of UN Sanction List while conducting any business. The compliance with AML/CFT weaknesses/irregularities, as the bank‘s Head Office and Bangladesh Bank‘s inspection report mentioned. 5.5 Independent Testing Procedure As per AML circular 15, testing is to be conducted at least annually by financial institutions internal audit personnel, compliance department, and by an outside party such as the institutions external auditors. The test will cover the following areas: ■ ■ ■ ■ ■ ■ ■ ■ Branch Compliance Unit/BAMLCO Knowledge of officers/employees on AML/CFT issues Customer Identification (KYC) process Branch‘s receipt of customer‘s expected transaction profile and monitoring Process and action to identify Suspicious Transaction Reports (STRs) Regular submission of reports to CCU Proper record keeping Overall AML related activities by the branch The tests include interviews with employees handling transactions and interviews with their

supervisors to determine their knowledge and compliance with the financial institutions Anti Money Laundering procedures. ■ sampling of large transactions followed by a review of transaction record retention forms and suspicious transaction referral forms; Page 56 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism ■ test of the validity and reasonableness of any exemption granted by the financial institution; and ■ test of the record keeping system according to the provisions of the laws. 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. Page 57 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism CHAPTER VI: COMPLIANCE PROGRAM 6.1 Compliance Program Financial institutions subject to laws should establish and maintain an effective AML/CFT program that

includes at least the followings: • • • Development of internal policies, procedures and controls; Appointment of an AML/CFT Compliance Officer; Ongoing employee training programs; and • Independent audit function including internal and external audit function to test the programs. The compliance program should be documented, approved by the Board of Directors and communicated to all levels of the organization. In developing an AML/CFT compliance program, attention should be paid to the size and range of activities, complexity of operations, and the nature and degree of ML and/or TF risks associated with FIs. 6.2 Development of Internal Policies, Procedures and Controls 6.21 Internal Policy Each financial institution must develop, administer, and maintain its own AML/CFT policy that ensures and monitors compliance with the laws, including record keeping and reporting requirements. Such a compliance policy must be written, approved by the board of directors, and noted as

such in the board meeting minutes. The written AML/CFT compliance policy should establish clear responsibilities and accountabilities within their organizations to ensure that policies, procedures, and controls are introduced and maintained which can deter criminals from using their facilities for money laundering and the financing of terrorist activities, thus ensuring that they comply with their obligations under the Act. The policies should be tailored to the institution and would have to be based upon an assessment of the money laundering and terrorist financing risks, taking into account the financial institutions business structure and factors such as its size, location, activities, methods of payment, and risks or vulnerabilities to money laundering and terrorist financing. It should include standards and procedures to comply with applicable laws and regulations to reduce the prospect of criminal abuse. The procedures should address its Know Your Customer (KYC) policy and

identification procedures before opening new accounts, monitoring existing accounts for unusual or Page 58 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism suspicious transaction/activities, information flows, reporting suspicious transaction, hiring and training employees and a separate audit or internal control function to regularly test the program‘s effectiveness. It should also include a description of the roles the AML/CFT Compliance Officer(s)/Unit and other appropriate personnel will play in monitoring compliance and effectiveness of AML/CFT policies and procedures. It should develop and implement screening programs to ensure high standards when hiring employees. Implement standards for employees who consistently fail to perform in accordance with an AML/CFT framework. It should incorporate AML/CFT compliance into job descriptions and performance evaluations of appropriate personnel. It should have the arrangements for

program continuity despite changes in management or employee composition or structure. The AML/CFT policies should be reviewed regularly and updated as necessary and at least annually based on any legal/regulatory or business/operational changes, such as additions or amendments to existing AML/CFT related rules and regulations/Act or business. In addition the policy should emphasize the responsibility of every employee to protect the institution from exploitation by money launderers and terrorist financiers, and should set forth the consequence of non-compliance with the applicable laws and the institution‘s policy, including the criminal, civil and disciplinary penalties and reputational harm that could ensue from any association with money laundering and terrorist financing activity. The most important element of a successful AML/CFT program is the commitment of senior management, including the chief executive officer and the board of directors, to the development and enforcement

of the AML/CFT programs which can deter identify criminals from using their facilities for money laundering and terrorist financing, thus ensuring that they comply with their obligations under the laws. Page 59 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 6.22 Components of Policy The statement of compliance policy should at a minimum include: ■ A statement that all employees are required to comply with applicable laws and regulations and corporate ethical standards. ■ A statement that all activities carried out by the financial institution must comply with applicable governing laws and regulations. ■ A statement that compliance 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 cannot be an excuse for non-compliance. ■ A statement that should direct staff to a compliance officer or other knowledgeable individuals when there is a question regarding compliance matters. ■ A statement that employees will be held accountable for carrying out their compliance responsibilities. 6.23 Communicating the Policy As part of its AML/CFT policy, an institution should communicate clearly to all employees on annual basis through a statement from the Chief Executive Officer/ President and Managing Director that clearly sets forth its policy against money laundering & terrorism financing 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 and terrorist financing. 6.24 Procedures The standard operating procedures are often designed at

a lower level in the organization and modified as needed to reflect the changes in products, personnel and promotions, and other day to day operating procedures. It will be more detailed than policies Standard operating procedures translate policy into an acceptable and working practice. In addition to policies and procedures, there should also be a process to support and facilitate effective implementation of procedures and that should be reviewed and updated regularly. 6.25 Internal Control Mechanism The compliance program also relies on the variety of internal controls, including management report, built-in safeguards and exception report that keep the program working. FATF recommendation 18 requires that financial institutions have an internal control program. Page 60 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism The following elements should be included in the operational controls of any policy: • Statement of responsibility

for compliance with policy; • Customer due diligence;  Customer identification/verification  Additional know your customer information  High risk customers  Non face to face business (if applicable)  Handling of politically exposed persons • Monitoring for suspicious or unusual transaction/activity; • Cooperation with the authorities; • Record keeping ; • Screening of transactions and customers; • Training and awareness; • Adoption of risk management practices and use of a risk-based approach. 6.26 Establishment of Central Compliance Unit, Anti Money Laundering Department To ensure compliance of the Money Laundering Prevention Act, 2012 and ATA 2009 (as amended in 2012) each financial institution will establish arrangement for internal monitoring and control through formation of a Central Compliance Unit (CCU) under the leadership of a high official at the Head Office. In order to accomplish properly the jurisdiction and function of the CCU, each financial

institution will determine institutional strategy and program. CCU will issue the instructions to be followed by the branches; these instructions will be prepared on the basis of combination of issues in monitoring of transactions, internal control, policies and procedures from the point of view of preventing money laundering & terrorist financing. CCU shall be dedicated solely to FI‘s related responsibilities and perform the compliance functions. The responsibilities of a CCU shall include: a) preparing an overall assessment report after evaluating the self assessment reports received from the branches and submitting it with comments and recommendations to the chief executive of the bank; b) preparing an assessment report on the basis of the submitted checklist of inspected branches by the Internal Audit Department on that particular quarter; c) submitting a half-yearly report to BFIU within 60 days after end of the period. Page 61 of 99 AMLD/2013 Manual on Prevention of

Money Laundering and Combating Financing on Terrorism Organogram of the Central Compliance Unit, Anti Money Laundering Department Chief Executive Officer President & Managing Director Chief Anti Money Laundering Compliance Officer (CAMLCO), DMD Deputy Chief AML Compliance Officer (DCAMLCO), EVP/SVP Deputy Chief AML Compliance Officer (DCAMLCO), Head of AMLD, VP AML Compliance Officer, (Head of Operation) AVP/FAVP AML Compliance Officer (Head of Audit) VP/FVP Deputy Head of Audit, AVP/FAVP Deputy Head of Operation, EO/SO AML Compliance Officer SO/Officer Head of Training, AVP/FAVP SO/Officer EO/SO EO/SO (7) SO/ Officer Officer/ JO (8) Officer EO/SO 6.3 Appointment of AML/CFT Compliance Officer 6.31 Appointment of Chief AML/CFT Compliance Officer Each financial institution must designate a Chief AML/CFT Compliance Officer (CAMLCO) at its head office/ corporate office who has sufficient authority to implement and enforce corporate-wide AML/CFT policies, procedures

and measures. The CAMLCO will directly report to the Chief Executive Officer/ President & Managing Director for his/her responsibility. The CAMLCO will also be responsible to coordinate and monitor day to day compliance with applicable AML/CFT related laws, rules and regulations as well as with its internal policies, practices, procedures and controls. Page 62 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism i) Position of CAMLCO The Chief AML/CFT Compliance Officer will be the head of CCU. The designated CAMLCO, directly or through CCU, should be a central point of contact for communicating with the regulatory and/or investigation agencies regarding issues related to financial institutions AML/CFT program. The position of the CAMLCO should be within next two rank of the Chief Executive Officer or Managing Director of Bank. ii) Qualification and experience The CAMLCO should have a working knowledge of the diverse financial products

offered by the financial institutions. The person could have obtained relevant financial institutional and compliance experience as an internal auditor or regulatory examiner, with exposure to different financial institutional products and businesses. Product and financial institutional knowledge could be obtained from being an external or internal auditor, or as an experienced operational staff. The Chief AML/CFT Compliance Officer should have a minimum of seven years of working experience, with a minimum of three years at a managerial/administrative level. iii) Responsibilities Each financial institution should prepare a detailed specification of the role and obligations of the CAMLCO. Depending on the scale and nature of the financial institution the designated Chief AML/CFT Compliance Officer may choose to delegate duties or rely on suitably qualified staff for their practical performance whilst remaining responsible and accountable for the operation of the designated functions.

The major responsibilities of a CAMLCO are as follows: 1. To monitor, review and coordinate application and enforcement of the financial institution‘s compliance policies including AML/CFT Compliance Policy. This will include - an AML/CFT risk assessment, practices, procedures and controls for account opening, KYC procedures and ongoing account/transaction monitoring for detecting suspicious transaction/account activity, and a written AML/CFT training plan. 2. To monitor changes of laws/regulations and directives of Bangladesh Bank and revise its internal policies accordingly; 3. To respond to compliance questions and concerns of the staff and advise regional offices/branches/units and assist in providing solutions to potential issues involving compliance and risk; 4. To ensure that the financial institution‘s AML/CFT policy is complete and up-to-date, to maintain ongoing awareness of new and changing business activities and products and to identify potential compliance issues that

should be considered by the financial institution; 5. To develop the compliance knowledge of all staff, especially the compliance personnel and conduct training courses in the institution in this regard; Page 63 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 6. To develop and maintain ongoing relationships with regulatory authorities, external and internal auditors, regional/branch/unit heads and compliance resources to assist in early identification of compliance issues; 7. To assist in review of control procedures in the financial institution to ensure legal and regulatory compliance and in the development of adequate and sufficient testing procedures to prevent and detect compliance lapses; 8. To monitor the business through self-testing for AML/CFT compliance and take any required corrective action; 9. To manage the STR/SAR process: • • • • • • reviewing transactions referred by divisional, regional, 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 (SARs):  are prepared when appropriate;  reflect the uniform standard for “suspicious activity involving possible money laundering or terrorist financing” established in its policy;  are accompanied by documentation of the branch‘s decision to retain or terminate the account as required under its 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 to the institution, including reputation 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; managing the process for reporting suspicious activity to BFIU after appropriate internal consultation; 6.32 Branch Anti Money Laundering Compliance Officer FIs will appoint Branch Anti Money Laundering Compliance Officer (BAMLCO) at each of their branches. BAMLCO will be the second man of a branch and have a minimum three year experience in related field. The responsibilities of a BAMLCO are as follows: ■ Manage the transaction monitoring process ■ Report any suspicious activity to Branch Manager, and if necessary to the CAMLCO Page 64 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism ■ Provide training to Branch staff ■ Communicate to all staff in case of any changes in national or its own policy ■ Submit branch returns to CAMLCO timely. 6.33 Responsibilities of

Other Employees The table below details the individual responsibilities of the employees of an FI:Function Role / Responsibilities Staff Responsible for account opening ■ Perform due diligence on prospective clients prior opening an account ■ 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 customers KYC profile and transaction activity ■ Escalate any suspicion to the Supervisor, Branch Manager and BAMLCO Customer Service Officer ■ Support the Account Officer in any of the above roles ■ Perform the Account Officer roles in their absence Operations Staff ■ Ensure that all control points are completed prior to transaction monitoring ■ Be diligence on transaction trends for clients ■ Update customer transaction profiles in the ledger/system Branch Manager (Unit Head)

■ Ensure that the program is effective within the branch/unit ■ First point of contact for any issues Risk Management /Credit Officer/ Internal Control Officer ■ Perform Risk Assessment for the Business ■ Perform periodic Quality Assurance on the program in the unit ■ Communicate updates in laws and internal policies Operations & Technology Manager ■ Ensures that the required reports and systems are in place to maintain an effective program Controller of Branches ■ Overall responsibility to ensure that the branches have an program in place and that it is working effectively Chief Executive Officer (CEO) ■ Overall responsibility to ensure that the Business has an AML program in place and it is working effectively Page 65 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism A sample organization chart of AMLD is given below: Chief Executive Officer President and Managing Director Chief Anti Money Laundering

Compliance Officer (CAMLCO), Deputy Managing Director Deputy Chief AML Compliance Officer (DCAMLCO), CCU, Head of AMLD, EVP/SVP Zonal Heads Head of Branch/ Branch Mangager Deputy Chief AML Compliance Officer (DCAMLCO), CCU, Vice President Branch Anti Money Laundering Compliance Officer (BAMLCO) AML Compliance Officer (Head of Training), AVP/FAVP AML Compliance Officer (Head of Audit), VP/FVP, AML Compliance Officer (Head of Operation), AVP/FAVP Deputy Head of Operation, EO/SO EO/SO (V) SO/Officer SO/Officer EO/SO Deputy Head of Audit, AVP/FAVP SO/Officer SO/ Officer Branch Anti Money Laundering Officer (BAMLO) EO/SO EO/SO EO/SO EO/SO EO/SO EO/SO EO/SO (V) Officer/ JO Page 66 of 99 Officer/ JO Officer/ JO Officer/ JO Officer/ JO Officer/ JO Officer/ JO AMLD/2013 Officer/ JO Manual on Prevention of Money Laundering and Combating Financing on Terrorism 6.4 Employee Training and Awareness Program FATF recommendation 18 suggests that a formal AML/CFT

compliance program should include an ongoing employee training program. The importance of a successful training and awareness program cannot be overstated. Employees in different business functions need to understand how the financial institution‘s policy, procedures, and controls affect them in their day to day activities. As per AML circular, each financial institution shall arrange suitable training for their officials to ensure proper compliance of money laundering and terrorist financing prevention activities. 6.41 The Need for Staff Awareness The effectiveness of the procedures and recommendations contained in these Guidance Notes must depend on the extent to which staff in institution appreciates the seriousness of the background against which the legislation has been enacted. Staff 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 staff must be trained

to co-operate fully and to provide a prompt report of any suspicious transactions/activities. It is, therefore, important that financial institutions introduce comprehensive measures to ensure that all staff and contractually appointed agents are fully aware of their responsibilities. 6.42 Education and Training Programs All relevant staff should be educated in the process of the “Know Your Customer” requirements for money laundering and terrorist financing 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 staff should be alert to any change in the pattern of a customer‘s transactions or circumstances that might constitute criminal activity. Although Directors

and Senior Managers may not be involved in the day-to-day procedures, it is important that they understand the statutory duties placed on them, their staff and the institution itself. Some sorts of high-level general awareness raising training are, therefore, also suggested. 6.43 General Training A general training program should include the following: Page 67 of 99 • General information on the risks of money laundering and terrorist financing schemes, methodologies, and typologies; • Legal framework, how AML/CFT related laws apply to FIs and their employees; AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism • Institution‘s policies and systems with regard to customer identification and verification, due diligence , monitoring; • How to react when faced with a suspicious client or transaction; • How to respond to customers who want to circumvent reporting requirements; • Stressing the importance of not tipping off

clients; • Suspicious transaction reporting requirements and processes; • Duties and accountabilities of employees; The person responsible for designing the training must identify which, if any, of these topics relate to the target audience. Effective training should present real life money laundering schemes, preferably cases that have occurred at the institution or at similar institutions, including, where applicable, how the pattern of activity was first detected and its ultimate impact on the institution. 6.44 Job Specific Training The nature of responsibilities/activities performed by the staff of a financial institution is different from one another. So their training on AML/CFT issues should also be different for each category Job specific AML/CFT trainings are as under: i) New Employees A general appreciation of the background to money laundering and terrorist financing, and the subsequent need for reporting any suspicious transactions 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 suspicions by the organization, that there is a legal requirement to report, and that there is a personal statutory obligation to do so. The new or fresh employee may be trained up within a year ii) Customer Service/Relationship Managers Members of staff who are dealing directly with the public are the first point of contact with potential money launderers and terrorist financiers and their efforts are vital to the organizations strategy in the fight against money laundering and terrorist financing. They must be made aware of their legal responsibilities and should be made aware of the organizations 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. It is

vital that front-line staffs are made aware of the organizations policy for dealing with nonregular (walk-in) customers particularly where large transactions are involved, and the need for extra vigilance in these cases. Page 68 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism iii) Processing (Back Office) Staff The staffs, who receive completed Account Opening, FDR application forms and cheques for deposit into customer‘s account or other investments must receive appropriate training in the processing and verification procedures. The staffs, who are in a position to deal with account opening, or to accept new customers, must receive the training given to relationship managers and other front office staff above. In addition, the need to verify the identity of the customer must be understood, and training should be given in the organizations account opening and customer/client verification procedures. Such staff should be aware that

the offer of suspicious funds or the request to undertake a suspicious transaction may need to be reported to the AML/CFT Compliance Officer (or alternatively a line supervisor) whether or not the funds are accepted or the transactions proceeded with and must know what procedures to follow in these circumstances. iv) Credit Officers Training should reflect an understanding of the credit function. Judgments about collateral and credit require awareness and vigilance toward possible laundering and funding terrorists. Indirect lending programs and lease financing also call for KYC efforts and sensitivity to laundering risks. v) Audit and compliance staff These are the people charged with overseeing, monitoring and testing AML/CFT controls, and they should be trained about changes in regulation, money laundering and terrorist financing methods and enforcement, and their impact on the institution. vi) Senior Management/Operations Supervisors and Managers A higher level of instruction

covering all aspects of money laundering and terrorist financing prevention procedures should be provided to those with the responsibility for supervising or managing staff. This will include the offences and penalties arising from the laws for non-reporting and for assisting money launderers and terrorist financers; internal reporting procedures and the requirements for verification of identity and the retention of records. vii) Senior Management and Board of Directors Money laundering and terrorist financing issues and dangers should be regularly and thoroughly communicated to the board. It is important that the Compliance Department has strong board support, and one way to ensure that is to keep board members aware of the reputational risk that money laundering and terrorist financing poses to the institution. Major AML/CFT compliance related circulars/circular letters issued by Bangladesh Bank should be placed to the board to bring it to the notice of the Board members. Page 69 of

99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism viii) AML/CFT Compliance Officer The CAMLCO/DCAMLCO/AML/CFT Compliance Officer should receive in depth training on all aspects of the Money Laundering and Terrorist Financing Prevention Legislation, Bangladesh Bank directives and internal policies and standards. In addition, the CAMLCO/DCAMLCO AML/CFT Compliance Officer 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. ix) Training Procedures The trainers can take the following steps to develop an effective training program: ■ Identify the issues that must be communicated and decide how best to do this e.g sometimes, e-learning can effectively do the job, sometimes classroom training is the best option. ■ Identify the audience by functional area as well as level of employee/management. This should be

accompanied by a quick “why are they here” assessment. New hires should receive training different from that given to veteran employees. ■ Determine the needs that are being addressed; e.g uncovered issues by audits or examinations, created by changes to systems, products or regulations. ■ Determine who can best develop and present the training program. ■ Create a course abstract or curriculum that addresses course goals, objectives and desired results. Be sure to identify who the audience should be and how the material will be presented ■ Establish a training calendar that identifies the topics and frequency of each course. ■ Course evaluation shall be done to evaluate how well the message is received; copies of the answer key should be made available. Similarly, in case of a case study used to illustrate a point, provide detailed discussion of the preferred course of action. ■ Track Attendance by asking the attendees to sign in. Employee who shall remain absent

without any reason may warrant disciplinary action and comments in employee‘s personal file. x) Refresher Training In addition to the above compliance 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 staff does not forget their responsibilities. Some FIs may wish to provide such training on an annual basis; others may choose a shorter or longer period or wish to take a Page 70 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism more flexible approach to reflect individual circumstances, possibly in conjunction/juxtaposition with compliance monitoring. Training should be conducted ongoing basis, incorporating trends and developments in an institution‘s business risk profile, as well as

changes in the legislation. Training on new money laundering and terrorist financing schemes and typologies are of the utmost importance when reviewing policies and controls and designing monitoring mechanisms for suspicions/unusual activity. 6.5 Independent Audit Function 6.51 Why the audit function is necessary To ensure the effectiveness of the AML/CFT program, financial institution should assess the program regularly and look for new risk factors. FATF recommendation 15 suggests that institutions covered by laws should establish and maintain policies, procedures and controls which should include an appropriate compliance function and an audit/inspection function. 6.52 Why the audit function must be independent The audit must be independent (i.e performed by people not involved with the FI‘s AML/CFT compliance staff). Audit is a kind of assessment of checking of a planned activity Only those will check or examine the institution who do not have any stake in it. To ensure objective

assessment it is important to engage an independent body to do audit. 6.53 Whom they report The individuals conducting the audit should report directly to the Board of Directors/Senior Management. 6.54 The ways of performing audit function Audit function shall be done by the internal audit. At the same time external auditors appointed by the FI to conduct annual audit shall also review the adequacy of AML/CFT program during their audit. CCU shall also review the adequacy of AML & CFT program of the branches and monitor the AML & CFT matters of the branches of FI. 6.55 Internal audit FI’s Internal auditors should be well resourced and enjoy a degree of independence within the organization. Those performing the independent testing must be sufficiently qualified to ensure that their findings and conclusions are reliable. The responsibilities of internal auditors are: ■ Address the adequacy of AML/CFT risk assessment. ■ Examine/attest the overall integrity and effectiveness

of the management systems and the Page 71 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism control environment. ■ Examine the adequacy of Customer Due Diligence (CDD) policies, procedures and processes, and whether they comply with internal requirements. ■ Determine personnel adherence to the financial institution‘s AML/CFT policies, procedures and processes. ■ Perform appropriate transaction testing with particular emphasis on high risk operations (products, service, customers and geographic locations). ■ Assess the adequacy of the FI‘s processes for identifying and reporting suspicious activity. ■ Communicate the findings to the Board and/or Senior Management in a timely manner. ■ Recommend corrective action for deficiencies. ■ Track previously identified deficiencies and ensures that management corrects them. ■ Assess training adequacy, including its comprehensiveness, accuracy of materials, training schedule and

attendance tracking. ■ Determine when assessing the training program and materials:  The importance that the Board and the Senior Management place on ongoing education, training and compliance.  Employee accountability for ensuring AML/CFT compliance.      Comprehensiveness of training, in view of specific risks of individual business lines. Participation of personnel from all applicable areas of the FI. Frequency of training. Coverage of FI‘s policies, procedures, processes and new rules and regulations. Coverage of different forms of money laundering and terrorist financing as they relate to identifying suspicious activity.  Penalties for noncompliance and regulatory requirements. 6.56 External Auditor External auditor shall play an essential part in reviewing the adequacy of controls by communicating their findings and recommendations to management via the annual management letter, which accompanies the audit report. External audit should focus their

audit programs on risk factors and conducts intensive reviews of higher risk areas where controls may be deficient. External auditors may report incidences of suspected criminal activity uncovered during audits, to the financial sector supervisors. Page 72 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism CHAPTER VII: CUSTOMER DUE DILIGENCE 7. 1 Who is a Customer? A ‘Customer’ is defined as: ■ a person or entity that maintains an account and/or has a business relationship with the bank/FIs; ■ one on whose behalf the account is maintained (i.e the beneficial owner) Beneficial Owner means the natural person who ultimately owns or controls a client and or the person on whose behalf a transaction is being conducted, and ■ exercise ultimate effective control over a juridical person ■ beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors etc. as permitted

under the law, and ■ any person or entity connected with a financial transaction which can pose significant reputational or other risks to the bank, say, a wire transfer or issue of a high value demand draft as a single transaction. For the purpose of KYC Procedure a "Customer" is defined in AML Circular No. 24 dated 03/03/2010, as: ■ any person or institution maintaining an account of any type with a bank or financial institution or having banking related business; ■ the person or institution as true beneficial owner in whose favour the account is operated; ■ the trustee, intermediary or true beneficial owner of the transaction of the accounts operated by the trust and professional intermediaries (such as lawyer/law firm, chartered accountant, etc)under the existing legal infrastructure; ■ high value single transaction conducted in a single Demand Draft, Pay Order, Telegraphic Transfer by any person or institution or any person/institution involved in a financial

transaction that may pose reputational and other risks to the institution. In this case if a transaction appears abnormal in relation to the usual transaction of the concerned person or institution that transaction will be treated as ― “high value”; 7.2 Know Your Customer Program The adoption of effective Know Your Customer (KYC) program is an essential part of financial institutions risk management policies. Having sufficiently verified/corrected information about customers - “Knowing Your Customer” (KYC) - and making use of that information underpins all AML/CFT efforts, and is the most effective defense against being used to launder the proceeds of crime. Financial institutions with inadequate KYC program may be subject to significant risks, especially legal and reputational risk. Sound KYC Policies and Procedures not only contribute to the financial institutions overall Page 73 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on

Terrorism safety and soundness, they also protect the integrity of its system by reducing money laundering, terrorist financing and other related offences. 7.3 Know Your Customer (KYC) Procedure Money Laundering Prevention Act, 2012 requires all reporting agencies to maintain correct and concrete information with regard to identity of its customer during the operation of their accounts. FATF recommendation 10 states that where the financial institution is unable to identify the customer and verify that customer‘s identity using reliable, independent source documents, data or information, and to identify the beneficial owner, and to take reasonable measures to verify the identity of the beneficial owner and unable to obtaining information on the purpose and intended nature of the business relationship, it should not open the account, commence business relations or perform the transaction; or should terminate the business relationship; and should consider making a suspicious

transactions report in relation to the customer. 7.31 Nature of Customer’s Business 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 as opportunities arise. In order to judge whether a transaction is or is not suspicious, institutions need to have a clear understanding of the business carried out by their customers. 7.32 Identifying Real Person An institution must establish to its satisfaction that it is dealing with a real person (natural, corporate or legal), and must verify the identity of persons who are authorized to operate any account, or transact business for the customer. Whenever possible, the prospective/forthcoming customer should be interviewed personally. This will safeguard against opening of fictitious account. 7.33 Document is not

enough The best identification documents possible should be obtained from the prospective/forthcoming customer i.e those that are the most difficult to obtain illicitly No single piece of identification can be fully guaranteed as genuine, or as being sufficient to establish identity so verification will generally be a cumulative process. The overriding principle is that every FI must know who their customers are, and have the necessary documentary evidence to verify this. Collection of document is not enough for KYC, identification is very important. Page 74 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 7.4 Components of KYC Program Financial institutions in the process of designing the KYC program should include certain key elements. Such essential elements should start from the financial institutions ‘risk management and control procedures and should include (1) Customer acceptance policy, (2) Customer identification, (3) Risk

Categorization-Based on Activity and KYC Profile and (4) Transaction Monitoring Process. FIs should not only establish the identity of their customers, but should also monitor account activities 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 financial institutions’ 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. 7.41 Customer Acceptance Policy Each financial institution should develop a clear customer acceptance policy and procedures, laying down explicit criteria for acceptance of customers including a description of the types of customer that are likely to pose a higher than average risk to a financial institution. 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. It is important that the customer acceptance policy is not so restrictive that it results in a denial of access by the general public to financial services, especially for people who are financially or 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. The customer Acceptance Policy has to ensure that explicit guidelines are in place on the following aspects of customer relationship in the financial institution: 1) No account should be opened in anonymous or fictitious name. Branch will collect full & accurate name of clients and preserve documents in conformity with it.

Branch will prepare proper KYC of the clients. 2) Parameters of risk perception should be clearly defined in terms of the source of fund, the nature of business activity, location of customer and his clients, mode of payments, volume of turnover, service offered, social and financial status etc. to categorize customers into different risk grades. 3) Documentation requirements and other information to be collected in respect of different Page 75 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism categories of customers depending on perceived risk. 4) Not to open an account or close an account where the financial institution is unable to apply appropriate customer due diligence measures i.e financial institution is unable to verify the identity and/or obtain documents required as per the risk categorization due to non cooperation of the customer or non reliability of the data and information furnished to the financial institution. Decision

by a financial institution to close an account should be taken at a reasonably high level after giving due notice to the customer explaining the reasons for such a decision. 5) Circumstances, in which a customer is permitted to act on behalf of another person or entity, should be clearly spelt out in conformity with the established law and practices of financial service as there could be occasions when an account is operated by a mandate holder or where an account is opened by an intermediary in fiduciary capacity. 6) Necessary checks before opening a new account to ensure that the identity of the customer does not match with any person with known criminal background or with banned entities such as individual terrorists or terrorist organizations etc. 7) The status of a customer may change as relation with a customer progresses. The transaction pattern, volume of a customer‘s account may also change with times an ordinary customer can turn into a risky one. To address this issue,

customer acceptance policy should include measures to monitor customer‘s activities throughout the business relation. 7.42 Customer Identification Customer identification is an essential element of KYC standards. The customer identification process applies naturally at the outset of the relationship. To ensure that records remain up-to-date and relevant, there is a need for financial institution to undertake regular reviews of existing records. An appropriate time to do so is when a transaction of significance takes place, when customer documentation standards change substantially, or when there is a material change in the way that the account is operated. However, if a financial institution becomes aware at any time that it lacks sufficient information about an existing customer, it should take steps to ensure that all relevant information is obtained as quickly as possible. Once verification of identity has been satisfactorily completed, no further evidence is needed to undertake

subsequent transactions. However, information should be updated or reviewed as appropriate and records must be maintained. 7.421 What Constitutes a Customer’s Identity? Identity generally means a set of attributes which uniquely define a natural or legal person. There are two main constituents of a person‘s identity, remembering that a person may be Page 76 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism any one of a range of legal persons (an individual, corporate body, partnership, etc). For the purposes of this guidance, the two elements are: ■ the physical identity (e.g Birth Certificate, TIN/VAT Registration, Passport/National ID, Driving License etc.); and ■ the activity undertaken. 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 issuance should be recorded. The other main element in a person‘s identity is sufficient information about the nature of the business that the customer expects to undertake, and any expected or predictable, pattern of transactions. For some business these may be obvious, however, for more complex businesses this may not be the case. The extent of the description required will depend on the institution‘s own understanding of the applicant‘s business. Once account relationship has been established, reasonable steps should be taken by the institution to ensure that descriptive information is kept up-to-date as opportunities arise. It is important to emphasize that the customer identification process does not end at the point of application. The need to confirm and update information about identity, such as changes of address, and the extent of

additional KYC information to be collected over time will differ from sector to sector and between institutions within any sector. It will also depend on the nature of the product or service being offered, and whether personal contact is maintained enabling file notes of discussion to be made or whether all contact with the customer is remote. 7.422 Account of Individual Customers Following information must be obtained by the Branch/Bank while opening accounts or establishing other relationships with individual customers: ■ Full and Accurate Name; ■ Parent‘s Names in full; ■ Spouse Name; ■ Date of Birth; ■ Present and Permanent Address; ■ Details of occupation/employment and sources of fund; ■ Contact information, such as - mobile/telephone number; ■ Nominee information with signature; Page 77 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism ■ Photograph of both Account Holder (Two Copies) and Nominee duly signed

by the introducer and a/c holder respectively. ■ Transaction Profile (TP) should be obtained in consistence to source of fund that must be monitored periodically. The original, certified copy of the following Photo ID also play vital role to identify the customer:  Valid passport; or  Valid driving license; or  National ID Card; or  TIN Certificate, if required;  Employer provided ID Card, bearing the photograph and signature of the applicant or Employer Certificate;  Copy of Telephone/Gas/Utility bill of the A/C holder or of the premises/addresses. Identification documents bear with valid and current photographs, signatures, or are easy to obtain, are normally not appropriate as evidence of identity, but Birth Certificate, Certificate from City Corporation, Union Parishod, etc. may be considered as documents for identity also. Any photocopies of documents showing photographs and signatures should be clearly understandable. One or more of the following steps is

recommended to verify addresses: ■ 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); ■ checking the telephone directory; ■ visiting home/office; ■ sending thanks letter to account holder and Introducer. The information obtained should demonstrate that a person of that name exists at the address given, and that the applicant is that person. 7.423 Account of Proprietorship Concern Following information must be obtained by the Branch/Bank while opening account or establishing other relationships with Proprietorship Concern: ■ Valid and updated Trade License issued by the Municipal authorities or Competent Authorities ■ TIN certificate of the Concern or the A/C holder ■ Requisite information as stated in 7.422 relevant for the account holder Page 78 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating

Financing on Terrorism 7.424 Account of Limited Company Because of the difficulties of identifying beneficial ownership, and the possible complexity of organization and structures, corporate entities and trusts are the most likely vehicles to be used for money laundering. Particular care should be taken to verify the legal existence of the applicant and to ensure that any person purporting to act on behalf of the applicant is authorized to do so. The principal requirement 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. Before a business relationship is

established, measures should be taken by way of company search and/or other commercial enquiries to ensure that the applicant company has not been, or is not in the process of being, dissolved, and struck off, wound-up or terminated. In addition, if the institution becomes aware of changes in the company structure or ownership, or suspicions are aroused by a change in the nature of business transacted, further checks should be made. No further steps to verify identity over and above usual commercial practice will normally be required where the applicant for business is known to be a company, or a subsidiary of a company, quoted on a recognized stock exchange. The following documents should normally be obtained from companies: ■ Valid and updated Trade License issued by the Municipal authorities or Competent Authorities ■ Certified copy of Certificate of Incorporation, details of the registered office, and place of business; ■ Certified copy of the Memorandum and Articles of

Association. ■ Board Resolution to open the account relationship with the respective Branch /Bank and the empowering authority for those who will operate the account; ■ Copies of the list/register of directors. ■ TIN certificate of the company/firm and all of the Directors. ■ Requisite information as stated in 7.422 relevant of all the Directors ■ Explanation of the nature of the applicants business, the source of funds, and a copy of the last available financial statements where appropriate; ■ Satisfactory evidence of the identity of the account signatories, details of their relationship with the company. Subsequent changes to signatories must be verified; Page 79 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism ■ For verifying the genuineness of the information about the company and the directors, certified copies of the returns submitted to the Registrar of Joint Stock Companies should be taken. If the Company is

incorporated outside Bangladesh, documents attested by the Bangladesh Embassies/High Commissions in the respective countries should be submitted. The following persons (i.e individuals or legal entities) must also be identified in line with this part of the notes: ■ All of the directors who will be responsible for the operation of the account / transaction. ■ All the authorized signatories for the account/transaction. ■ All holders of powers of attorney to operate the account/transaction. ■ The beneficial owner(s) of the company. ■ The majority shareholders of a private limited company. When authorized 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 authorized signatories have not changed. 7.425 Account of Partnership Firms 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. 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. Evidence of the trading address of the business or partnership should be obtained and a copy of the latest report and accounts (audited where applicable) should retain with Account Opening Form. 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. Page 80 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating

Financing on Terrorism Following information must be obtained by the Branch/Bank while opening account or establishing other relationships with Partnership Firms: ■ Valid and updated Trade License issued by the Municipal authorities or Competent Authorities ■ Registration certificate, if registered ■ Partnership deed (Notarized) ■ Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf ■ Any officially valid document identifying the partners and the persons holding the Power of Attorney and their addresses ■ TIN certificate of the firm and TIN of the partners. ■ Requisite information as stated in 7.422 relevant of all the partners 7.426 Accounts of other organizations: Following information must be obtained by the Branch/Bank while opening account or establishing other relationships with the organizations: ■ Club/Society: Particulars of the office, bearers. Constitution or By-Laws, if registered the Government authorization

letter; ■ Co-operative Society/Limited Society: By-Laws authenticated by the CoOperative Officer, particulars of the office bearers, resolution for opening of account, certificate of registration; ■ Private School, College and Madrasha: Full particulars of the members of the Governing Body or Managing Committee, Resolution for opening of Account; ■ Trustee Board: Certified copy of the deed of the trust, full particulars of the members of the trustee Board, Resolution for opening of Account; ■ NGOs: Permission from NGO Bureau, resolution for opening account; ■ Requisite information as stated in 7.422 relevant of Managing Committee or Governing Body or Trustee Board; 7.427 Joint Accounts In respect of joint accounts the full name and accurate name and address of the account holders should be in accordance with valid documents under SL no. 7422 7.428 No face-to-face contact Where there is no face-to-face contact, Bank should not allow in establishing relationship with the

clients. Page 81 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 7.429 Appropriateness of documents There is obviously a wide range of documents which might be provided as evidence of identity. It is for each institution to decide the appropriateness of any document in the light of other procedures adopted. However, particular care should be taken in accepting documents which appear to be easily forged or which can be easily obtained using false identities. 7.4210 Change in address or other details Any subsequent change to the customer‘s name, address, or employment details of which the Branch becomes aware should be recorded as part of the 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. 7.4211 Record keeping All documents collected or gathered for establishing relationship must be filed in with supporting evidence.

Where this is not possible, the relevant details should be recorded on the applicants file. Bank which regularly conduct one-off transactions, should record the details in a manner which allows cross reference to transaction records. 7.4212 Introducer To identify the customer and to verify his/her identity, an introducer may play important role. An introduction from a respected customer, personally known to the management, or from a trusted member of staff, may assist the verification procedure but does not replace the need for verification of address as set out above. Details of the introduction should be recorded on the customers file. However, personal introductions without full verification should not become the norm, and directors/senior managers must not require or request staff to breach account opening procedures as a favor to an applicant. 7.4213 Persons without Standard Identification Documentation It is generally believed that financial inclusion is helpful in preventing

money laundering and terrorist financing. Most people need to make use of the financial system at some point in their lives. It is important, therefore, that the socially or financially disadvantaged such as the elderly, the disabled, students and minors should not be precluded from obtaining financial services just because they do not possess evidence of identity or address where they cannot reasonably be expected to do so. In these circumstances, a common sense approach and some flexibility without compromising sufficiently rigorous AML procedures is recommended. Internal procedures must allow for this, and must provide appropriate advice to staff on how Page 82 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism identity can be confirmed in these exceptional circumstances. The important point is that a persons identity can be verified from an original or certified copy of another document, preferably one with a photograph. FIs shall

not allow “high value’’ transactions to this kind of customers. 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. In these cases it may be possible for the institution 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 he/she 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. 7.4214 Minor For minor, Bank shall obtain following information while opening accounts relationship: ■ ■ ■ ■ ■ ■ ■ Full and accurate name; Parent‘s names in full; Date of Birth; Current and Permanent Address; Birth Certificate Contact information, such as - mobile/telephone no. Full information of the Guardian like Photos, Passport/NID and Personal Information. Where such procedures would not be relevant, or do not provide satisfactory evidence of identity, verification might be obtained in the form of the home address of parent(s). Under normal circumstances, a family member or guardian who has an existing relationship with the institution concerned would introduce a minor. In cases where the person

opening the account is not already known, the identity of that person, and any other person who will have control of the account, should be verified. Page 83 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 7.4215 Powers of Attorney/ Mandates to Operate Accounts The authority to deal with assets under a power of attorney constitutes a business relationship and therefore, where appropriate, it may be advisable to establish the identities of holders of powers of attorney, the grantor of the power of attorney and third party mandates. Records of all transactions undertaken in accordance with a power of attorney should be kept. On the other hand, valid reasons to execute mandate under the law for operating the accounts should exist. 7.4216 Timing and Duration of Verification The best time to undertake verification is prior to entry into the account relationship. Verification of identity should, as soon as is reasonably practicable, be

completed before any transaction is completed. However, if it is necessary for sound business reasons to open an account or carry out a significant one-off transaction before verification can be completed, this should be subject to stringent controls which should ensure that any funds received are not passed to third parties. Alternatively, a senior member of staff may give appropriate authority This authority should not be delegated, and should only be done in exceptional circumstances. Any such decision should be recorded in writing Verification, once begun, should normally be pursued either to a satisfactory conclusion or to the point of refusal. If a prospective customer does not pursue an application, staff may (or may not) consider that this is itself suspicious. 7.43 Risk Categorization-Based on Activity and KYC Profile When opening accounts, the concerned officer must assess the risk that the accounts may be used for “Money Laundering & Terrorist Financing” and must be

classify the accounts as either High Risk or Low Risk. The risk assessment may be made using KYC Profile Form given in the Annexure I in which following seven risk categories are scored using a scale of 1 to 5 where scale 4-5 denotes High Risk, 3 denotes Medium and 1-2 denotes Low Risk: 1. 2. 3. 4. 5. 6. 7. Page 84 of 99 Occupation or nature of customer’s business Net worth/sales turnover of the customer Mode of opening the account Expected value of monthly transactions Expected number of monthly transactions Expected value of monthly cash transactions Expected number of monthly cash transactions AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism The risk scoring of less than 14 indicates low risk but 14 and more than 14 would indicate high risk. The risk assessment scores are to be documented in the KYC profile form. Moreover, Branch may change the risk category of the customer subject to qualitative judgment. 7.44 Transaction Monitoring

Process Bank/Branches are expected to have systems and controls in place to monitor on an ongoing basis the relevant activities in course of the business relationship. The nature of this monitoring will depend on the nature of the business. The purpose of this monitoring is for Banks to be vigilant for any significant changes or inconsistencies in the pattern of transactions. Inconsistency is measured against the stated original purpose of the accounts i.e the declared Transaction Profile (TP) of the customer. Transaction Profile can be monitored periodically Possible areas to monitor could be:a) b) c) d) e) Transaction profile Frequency Unusually large amounts Geographical origin/destination Changes in account signatories. 7.5 Card/Internet Banking/Mobile Banking The KYC procedures is invariably be applied to new technologies including ‘Bank Asia Debit Card/ Credit Card ’ products / Internet Banking/Mobile Banking facility or such other product which may be introduced by the

Bank in future that might favour anonymity, and take measures, if needed to prevent their use in money laundering schemes. Branches should ensure that appropriate KYC procedures are duly applied before issuing the cards to the customers. It is also desirable that if at any point of time Bank appoints/engages agents for marketing of these cards / products are also subjected to KYC measures. 7.6 Know Your Customer’s Customer (KYCC) Enhance due diligence is required to be in practice to Know Your Customer’s Customer ensuring the highest level of compliance in AML & CFT issues. KYCC has become the most important tool for identification/verification of the customer’s business. It is essential to find out the customer’s customer to whom they are dealing with. On the other hand, Customers close association or family members or beneficiary of the account should be known in toto. A Financial Institution should 1. Take a list with the true identification like name, address, type of

business, etc of customer’s customer; Page 85 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 2. Review the given list and check the background of the customer’s customer at least half yearly basis if necessary; 3. Monitor the transaction occurred by the customer’s customer; 4. Monitor the customer’s customer business indirectly 7.7 Know Your Employee (KYE) Institutions and businesses learn at great expense that an insider can pose the same ML/TF threat as a customer. It has become clear in the field that having co-equal programs to know your customer and to know your employee is essential/vital. In an effort to identify and anticipate trouble before it costs time, money and reputational damage/risk. Financial Institutions should develop program to look closely at the people inside their own organizations. A Know Your Employee (KYE) program means that the institution has a program in place that allows it to understand an

employee‘s background, conflicts of interest and susceptibility to money laundering complicity. Policies, procedures, internal controls, job description, code of conduct/ethics, levels of authority, compliance with personnel laws and regulations, accountability, dual control, and other deterrents/restrictions should be firmly in place. Background screening of prospective and current employees, especially for criminal history, is essential to keep out unwanted employees and identifying those to be removed. It can be an effective risk management tool, providing management with some assurance that the information provided by the applicant is true and that the potential employee has no criminal record. It can be used effectively, the pre-employment background checks/examines may reduce turnover by verifying that the potential employee has the requisite skills, certification, license or degree for the position; deter theft and embezzlement; and prevent litigation over hiring practices. An

institution should verify that contractors are subject to screening procedures similar to its own. The sensitivity of the position or the access level of an individual employee may warrant additional background screening, which should include verification of references, experience, education and professional qualifications. The extent of the screening depends on the circumstances, with reasonableness the standard as well as source of income. Page 86 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism CHAPTER VIII: RECORD KEEPING 8.1 Statutory Requirement The requirement contained in Section 25 (1) of Money Laundering Prevention Act, 2012, to retain correct and full records of customers’ identification and transactions while operating an account of a customer, and to retain the records of customers’ identification and transactions at least for five years after closing of relationships with the customers are essential/important

constituents of the audit trail that the law seeks to establish. FATF recommendation 11 states that financial institutions should maintain, for at least five years, all necessary records on transactions, both domestic and international, to enable them to comply swiftly with information requests from the competent authorities. Such records must be sufficient to permit reconstruction of individual transactions (including the amounts and types of currency involved, if any) so as to provide, if necessary, evidence for prosecution of criminal activity. The records prepared and maintained by any FI on its customer relationship and transactions should be such that: ■ requirements of legislation and Bangladesh Bank directives are fully met; ■ competent third parties will be able to assess the institution‘s observance of money laundering policies and procedures; ■ any transactions effected via the institution can be reconstructed; ■ any customer can be properly identified and located;

■ all suspicious reports received internally and those made to Bangladesh Bank can be identified; and ■ the institution can satisfy within a reasonable time any enquiries or court orders from the appropriate authorities as to disclosure of information. Records relating to verification of identity will generally comprise: ■ a description of the nature of all the evidence received relating to the identity of the verification subject; ■ the evidence itself or a copy of it or, if that is not readily available, information reasonably sufficient to obtain such a copy. Records relating to transactions will generally comprise: ■ details of personal identity, including the names and addresses, etc. 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; Page 87 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism

■ details of transaction including: 1) nature of such transactions; 2) volume of transactions customer‘s instruction(s) and authority(ies); 3) source(s) of funds; 4) destination(s) of funds; 5) book entries; 6) custody of documentation; 7) date of the transaction; 8) form in which funds are offered and paid out; 9) parties to the transaction; 10) identity of the person who conducted the transaction on behalf of the customer. 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) closing of an account ii) providing of any financial services iii) carrying out of the one-off transaction, or the last in a series of linked one-off transactions; or iv) ending of the business relationship; or v) commencement of proceedings to recover debts payable on insolvency. Financial institutions should ensure that records pertaining to the identification of the customer, his/her address (e.g copies of

documents like passport, national ID card, driving license, trade license, utility bills etc.) obtained while opening the account and during the course of business relationship, are properly preserved for at least five years after the business relationship is ended and should be made available to the competent authorities upon request without delay. 8.2 Retrieval of Records To satisfy the requirements of the law and to meet the purpose of record keeping, it is important that records are capable of retrieval without undue delay. It is not necessary to retain all the documents relating to customer identity and transaction physically at the premises of the branch of a financial institution, provided that they have reliable procedures for keeping the hard copy at a central archive, holding records in electronic form, and that can be reproduced and recollected without undue delay. It is not always necessary to retain documents in their original hard copy form, provided that the firm has

reliable procedures for holding records in microchips 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 Page 88 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 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. 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. 8.3 STR and

Investigation Where a FI has submitted a report of suspicious transaction to BFIU or where it is known that a customer or any transaction is under investigation, it should not destroy any records related to the customer or transaction without the consent of the BFIU or conclusion of the case even though the five-year limit may have been elapsed. To ensure the preservation of such records the financial institutions should maintain a register or tabular records of all investigations and inspection made by the investigating authority or Bangladesh Bank and all disclosures to the BFIU. The register should be kept separate from other records and contain as a minimum the following details: i) ii) iii) iv) the date of submission and reference of the STR/SAR; the date and nature of the enquiry; the authority who made the enquiry, investigation and reference; and details of the account(s) involved. 8.4 Training Records Financial institutions will comply with the regulations concerning staff

training, they shall maintain training records which include:i) ii) iii) iv) details of the content of the training programs provided; the names of staff who have received the training; the date/duration of training; the results of any testing carried out to measure staffs understanding of the requirements; and v) an on-going training plan. 8.5 Branch Level Record Keeping To ensure the effective monitoring and demonstrate their compliance with the concerned regulations, FIs have to ensure the keeping or availability of the following records at the branch level either in hard form or electronic form: 1) Information regarding Identification of the customer, Page 89 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 2) 3) 4) 5) 6) 7) KYC information of a customer, Transaction report, Suspicious Transaction/Activity Report generated from the branch, Exception report, Training record, Return submitted or information provided to the Head

Office or competent authority. 8.6 Sharing of Record/Information of/to a Customer Under MLPA 2012, and ATA, 2009 (as amended in 2012), FIs shall not share account related information to investigating authority i.e, ACC or person authorized by ACC to investigate the said cases without having court order or prior approval from Bangladesh Bank. Page 90 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism CHAPTER IX: SUSPICIOUS TRANSACTION REPORT The final output of all compliance programs is reporting of suspicious transaction or reporting of suspicious activity. Suspicious Transaction Report (STR) or Suspicious Activity Report (SAR) is an excellent tool for mitigating or minimizing the risk for financial institutions. So it is necessary/essential for the safety and soundness of the institution. 9.1 Definition of STR/SAR Generally STR/SAR means a formatted report of suspicious transactions/activities where there are reasonable grounds to

suspect that funds are the proceeds of predicate offence or may be linked to terrorist activity or the transactions do not seem to be usual manner. Such report is to be submitted by financial institutions to the competent authorities. In the section (2)(z) of MLPA, 2012 "suspicious transaction" means such transactions which deviates from usual transactions; of which there is ground to suspect that, 1. the property is the proceeds of an offence, 2. it is financing to any terrorist activity, a terrorist group or an individual terrorist; 3. which is, for the purposes of this Act, any other transaction or attempt of transaction delineated in the instructions issued by Bangladesh Bank from time to time. In Anti Terrorism Act, 2009 (as amended in 2012), STR/SAR refers to the transaction that relates to financing for terrorism or terrorist individual or entities. One important thing is that financial institutions need not to establish any proof of occurrence of a predicate

offence; it is a must to submit STR/SAR only on the basis of suspicion. 9.2 Obligations of Such Report As per the Money Laundering Prevention Act, 2012, FIs are obligated to submit STR/SAR to Bangladesh Bank. Such obligation also prevails for the FIs in the Anti Terrorism Act, 2009 (as amended in 2012). Other than the legislation, Bangladesh Bank has also instructed the FIs to submit STR/SAR through AML Circulars issued by Bangladesh Bank time to time. 9.3 Reasons for Reporting Of STR/SAR As discussed above, STR/SAR is very crucial for the safety and soundness of the financial institutions. The FIs should submit STR/SAR considering the followings: ■ It is a legal requirement in Bangladesh; ■ It helps protect the reputation of FIs ; Page 91 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism ■ It helps to protect FIs from unfounded allegations of assisting criminals, including terrorists; ■ It helps the authorities to investigate

money laundering, terrorist financing, and other financial crimes. 9.4 Identification and Evaluation STR/SAR Identification of STR/SAR is very crucial for financial institutions to mitigate the risk. Identification of STR/SAR depends upon the detection mechanism in place by the financial institutions. Such suspicion may not only at the time of transaction but also at the time of doing KYC and attempt to transaction. 9.41 Identification of STR/SAR Identification of STR/SAR may be started identifying unusual transaction and activity. Such unusual transaction may be unusual in terms of complexity of transaction, nature of transaction, volume of transaction, time of transaction etc. Generally the detection of unusual transactions/activities may something be sourced as follows: ■ Comparing the KYC profile, if any inconsistency is found and there is no valid reasonable explanation. ■ By monitoring customer transactions. ■ By using red flag indicator. Simply, if any transaction/activity

is consistent with the provided information by the customer can be treated as normal and expected. When such transaction/activity is not normal and expected, it may treat as unusual transaction/activity. Normal/ Expected Transaction Comparing Information provided in AOF Transaction Profile KYC Profile other relevant documents Consistent Finding Normal/ Expected Transaction Inconsistent Unusual Transaction Page 92 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism As discussed above, the identification of STR/SAR may be sourced from unusual transaction or activity. In case of reporting of STR/SAR, FIs should conduct the following 3 stages: a) Identification This stage is very vital for STR/SAR reporting. Depending on size, need and complexity of financial institutions monitoring of unusual transactions may be automated, manually or both. Some financial institutions use specialized software to detect unusual transactions or

activities, however, the use of such software can only be complemented managerial oversight and not be replaced the need for constant monitoring of activity of the accounts of customers. Monitoring mechanisms should be more rigorous in high-risk areas of an institution and supported by adequate information systems to alert management and other appropriate staff (e.g, the compliance officer) of unusual /suspicious activity Training of staff in the identification of unusual /suspicious activity should always be an ongoing activity. Considering the nature of business FIs must be vigilant in KYC and sources of funds of the customer to identify STR/SAR. b) Evaluation These problems must be in place at Branch level and Central Compliance Unit (CCU). After identification of STR/SAR, at Branch level BAMLCO should evaluate the transaction/activity to identify suspicion by interviewing the customer or through any other means. In evaluation stage concerned BAMLCO must be tactful considering the

tipping off provision of the acts. If BAMLCO is not satisfied, he should forward the report to CCU. After receiving report from Branch CCU should also evaluate the report whether the STR/SAR report should be sent to BFIU or not. At every stages of evaluation (whether reported to Bangladesh Bank or not) financial institutions should keep records with proper manner. c) Disclosure This is the final stage and FIs should submit STR/SAR to Bangladesh Bank if it is still suspicious. For simplification the flow chart given in following page shows STR/SAR identification and reporting procedures: Page 93 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism Detect unusual transaction/activity Evaluate by BAMLCO Findings Close with proper records Suspicious Sent to CCU Evaluate by CCU Suspicious Not Suspicious Findings Close with proper records Report to BB 9.5 Risk-Based Approach An integrated risk-based system depends mainly on a proper

assessment of the relevant risk sectors, products, services, and clients and on the implementation of appropriate risk-focused due diligence and record-keeping. These in turn become the foundation for monitoring and compliance mechanisms that allow rigorous screening of high-risk areas and accounts. Without sufficient due diligence and risk profiling of a customer, adequate monitoring for suspicious activity would be impossible. According to the Wolfsberg Group Guidelines, a risk-based monitoring system for financial institutions clients should: • compare the client‘s account/transaction history to the client‘s specific profile information and a relevant peer group, and/or examine the clients account/transaction history against established money-laundering criteria/scenarios, in order to identify patterns of suspicious activity or anomalies; • establish a process to compare customer or transaction-specific data against risk-scoring models; • be capable of recognizing

patterns and of ―”learning” which transactions are normal for a client, rather than designating certain transactions as unusual (for example, not all large transaction are unusual and may easily be explained); • issue alerts if unusual transactions are identified; • track alerts in order to ensure they are appropriately managed within the institution and that suspicious activity is reported to the authorities as required; and • maintain an audit trail for inspection by the institutions audit function and by financial institutions supervisors. Page 94 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 9.6 Reporting Of STR/SAR Institutions enlisted as per MLPA, 2012 and ATA, 2009 (as amended in 2012) are obligated to submit STR/SAR to Bangladesh Bank. Such report must come to the Bangladesh Bank from CCU of the respective institutions by using specified format/instruction given by the Bangladesh Bank. 9.7 Tipping Off

Section 6 of MLPA 2012 and FATF Recommendation 21 prohibits financial institution, their directors, officers and employees from disclosing the fact that an STR or related information is being reported to BFIU. A risk exists that customers could be unintentionally tipped off when the FI is seeking to perform its CDD obligation in those circumstances. The customer‘s awareness of a possible STR or investigation could compromise future effort to investigate the suspected money laundering or terrorist financing operation. 9.71 Penalties of Tipping Off Under section 6 of MLPA, 2012, if any person, institution or agent empowered under this Act divulges any information collected, received, retrieved or known by the person, institution or agent during the course of employment or appointment, or after the expiry of any contract of service or appointment for any purpose other than the purposes of this Act shall be punished with imprisonment for a term not exceeding 2 (two) years or a fine not

exceeding taka 50 (fifty) thousand or with both. 9.8 “Safe Harbor” Provisions for Reporting Safe harbor laws encourage financial institutions to report all suspicious transactions by protecting financial institutions and employees from criminal and civil liability when reporting suspicious transactions in good faith to competent authorities. In section (28) of MLPA, 2012 provides the safe harbor for reporting 9.9 Red Flags or Indicators of STR 9.91 Moving Customers A customers who moves every month, particularly if there is nothing in that person‘s information suggesting that frequent changes in residence is normal, could be suspicious. 9.92 Out of market windfalls If you think a customer who just appeared at your institution sounds too good to be true, you might be right. Pay attention to one whose address is far from your institution, especially if there is no special reason why you were given the business. Aren‘t there institutions closer to home that could provide the

service? If the customer is a business, the distance to its operations may be an attempt to prevent you from verifying there is no business after all. Don‘t be bullied by your sales personnel who follow the ―"no question asked” philosophy of taking in new business. Page 95 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism 9.93 Suspicious Customer Behavior         Customer has an unusual or excessively nervous demeanor. Customer discusses your record-keeping or reporting duties with the apparent intention of avoiding them. Customer threatens an employee in an effort to discourage required record-keeping or reporting. Customer is reluctant to proceed with a transaction after being told it must be recorded. Customer appears to have a hidden agenda or behaves abnormally, such as turning down the chance to obtain a higher interest rate on a large account balance. Customer who is a public official opens

account in the name of a family member who begins making large deposits not consistent with the known source of legitimate family income. Customer who is a student uncharacteristically transacts large sums of money. Agent, attorney or financial advisor acts for another person without proper documentation such as a power of attorney. 9.94 Suspicious Customer Identification Circumstances  Customer furnishes unusual or suspicious identification documents and is unwilling to provide personal data.  Customer is unwilling to provide personal background information when opening an account.  Customer‘s permanent address is outside the FI‘s service area.  Customer asks many questions about how the financial institution disseminates information about the identification of a customer.  A business customer is reluctant to reveal details about the business activities or to provide financial statements or documents about a related business entity. 9.95 Suspicious Cash

Transactions  Customer opens several accounts in or more names, then makes several cash deposits under the reporting threshold.  Customer conducts large cash transactions at different branches on the same day, or orchestrates persons to do so in his/her behalf.  Corporate account has deposits and withdrawals primarily in cash than cheques. 9.96 Suspicious Non-Cash Deposits  Customer deposits large numbers of consecutively numbered money orders or round figure amounts.  Customer deposits cheques and/or money orders that are not consistent with the intent of the account or nature of business. Page 96 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism   Funds out of the accounts are not consistent with normal business or personal items of the account holder. Funds deposited are moved quickly out of the account via payment methods inconsistent with the established purpose of the account. 9.97 Suspicious Activity in

Credit Transactions  A customer‘s financial statement makes representations that do not conform to accounting principles.  Customer suddenly pays off a large problem loan with no plausible explanation of source of funds.  Customer purchases certificates of deposit and uses them as collateral for a loan. 9.98 Suspicious Commercial Account Activity  Business customer presents financial statements noticeably different from those of similar businesses.  Large business presents financial statements that are not prepared by an accountant. 9.99 Suspicious Employee Activity  Employee exaggerates the credentials, background or financial ability and resources of a customer in written reports the FI requires.  Employee frequently is involved in unresolved exceptions or recurring exceptions on exception reports.  Employee lives a lavish lifestyle that could not be supported by his/her salary.  Employee frequently overrides internal controls or established approval

authority or circumvents policy. 9.910 Suspicious Activity in an FI Setting  Request of early encashment.  A DPS (or whatever) calling for the periodic payments in large amounts.  Lack of concern for significant tax or other penalties assessed when cancelling a deposit. Page 97 of 99 AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism List of Abbreviations AML/CFT AMLD APG ATA BAMLCO BB BDT BFIU CAMLCO CCU CDD CTC CTR FATF FI FIU FSRB GPML ICRG IOSCO IAIS KYC ML MLPA NCC NCCT OECD OFAC PEP SAR STR TF TP UN UNODC UNSCR Page 98 of 99 : Anti Money Laundering/Combating the Financing of Terrorism : Anti Money Laundering Department : Asia Pacific Group on Money Laundering : Anti Terrorism Act : Branch Anti Money Laundering Compliance Officer : Bangladesh Bank : Bangladesh Taka : Bangladesh Financial Intelligence Unit : Chief Anti Money Laundering Compliance Officer : Central Compliance Unit : Customer Due Diligence : Counter Terrorism

Committee : Cash Transaction Report : Financial Actions Task Force : Financial Institution : Financial Intelligence Unit : FATF Style Regional Body : Global program against Money Laundering : International Cooperation and Review Group : International Organization of Securities Commissions : International Association of Insurance Supervisors : Know Your Customer : Money Laundering : Money Laundering Prevention Act : National Coordination Committee on : Non-cooperating Countries and Territories : Organization for Economic Co-operation and Development : Office of Foreign Assets Control : Politically Exposed Persons : Suspicious Activity Report : Suspicious Transaction Report : Terrorist Financing : Transaction Profile : United Nations : UN Office of Drugs and Crime : United Nations Security Council Resolution AMLD/2013 Manual on Prevention of Money Laundering and Combating Financing on Terrorism Annexure Annexure -1: Model of Account Opening Form (Individual) Annexure -2: Model of

Account Opening Form (Institutional) Page 99 of 99 AMLD/2013 Account Opening Form Individual Account Current Account Short Term Deposit Account Savings Accounts Fixed Deposit Account Others. Name A/c No Customer Id : : : Account Opening Form - Individual Account Photograph of the A/C Holder(s) Date: D D M M Y Y Y Y The Manager Bank Asia Ltd. Branch Account No : Customer ID: Dear Sir, l/we am/are applying to open an account in the following type with your Branch. 1/ we are providing the detailed information below: 1. Account Title : Name of the Account 2. Type of Account : Nature of the Account to be opened or scheme name. Please mark (√ ) 3. Currency : Savings A/c Current A/c Short term Deposit A/c Fixed Deposit A/c FC NFCD RFCD Others Taka Dollar Euro Pound Others Please mark (√ 4. Account operating Instructions : Singly Jointly Either or any one Others Please mark (√ 5.Account with other Bank(s)(if any) : Bank’s

Name a. Types of Account [Please mark( √)] Deposit A/C Loan A/C Others Branch a. b. b. Deposit A/C Loan A/C Others c. c. Deposit A/C Loan A/C Others 6. Introducer’s Information : The introducer must be an account holder with the bank or an officer of the bank who is authorised to sign on behalf of the bank a. Name: b. Account no: Branch: c. Signature: 7. Initial Deposit Date: : Amount: Account Opened with the deposit amount Please mark (√) Cash Cheque Transfer Transfer from my/our Account No: 8. FDR related Information : Amount : Currency : Tenure : Date of Maturity : Renew Principal & Interest Renew Principal Only Renew Principal Only, Credit Interest to

A/C No 9. Special Scheme Information Not Applicable : Scheme’s Name : Tenure: One time payment/Installment Amount : No. of Installment (annual) : Payment on maturity : Monthly Payment : 10. Information about Nominee : 1/We are nominating the following individual as my/our nominee to pay the amount of my/our account. I/We preserve the right to change or cancel the nomination at any time. I/We hereby further declare that the Bank will not be held liable for any transaction according to our direction. Nominee’s Photograph (Attested by the A/C Holder) a) Name of the Nominee : b) Father’s Name : c) Mother’s Name :

d) Spouse Name : e) Date of Birth/Age : f) : g) Occupation : h) National Id No. : i) : Relationship with A/C holder Permanent Address : Nominee’s Signature If any non-resident is made nominee and he/she gets the amount payable from the concerned account, he/she may transfer the same abroad abiding by existing terms & conditions of Foreign Exchange Control Act. 11. Minor’s Information: Minors Parent. Legal guardian, Relation and other details As a legal guardian of the following Account Holder I hereby declare that the Account holder is a minor. The necessary

information of the minor is furnished in the attached form. The account will be operated in my signature as a legal guardian until the minor becomes adult or otherwise declared by me. Account holders (minor) Name : 1. 2 Date of Birth : 1. 2 Guardians Name : 1. 2 Relationship with the Minor : 1. 2 Both the minor and guardian must fill in the Form related to Individual information" and the guardian must sign in both the forms. 12. Source of Fund: 13. Link A/C : (with authorization to debit/credit) 14. Cheque Book: Customer’s instruction for issuance of Cheque Book Please issue a cheque book. I/We confirm that I/We have read the conditions printed inside the front cover of the cheque book and agreed to abide by the conditions □ At Bank in

person □ By Messenger (with written authority) Received Cheque No to both numbers inclusive Signature of recipient 15. Declaration and Signature: The signature must be same as the specimen signature given in the Signature Card I/We hereby ensure that I/We have read the terms and conditions in connection with the account and shall abide by such terms and conditions I/We also consciously declare that the above information is true. In addition to the concerned information provided I/We shall provide any other related information/ documents required by you 1. Signature 2 Signature Name Computer Coding This section is meant for Computer coding, SBS reporting, data maintenance, other reporting Name FOR BANK’S USE ONLY Customer ID No. Account Title Account No. SBS Code Account Type Currency Res. Economic Code

Customer Type Account opened by : Analysis Approved by : Name Name Branch Seal Desig. Desig Personal Information (This form is to be attached with the main form) Account No : Date : D D M M Y Y Y Y Customer ID: 1. Name of the A/C holder 2. Relation with the account : st nd 1 Applicant Please mark (√) rd 2 Applicant 3 Applicant Director Partner Minor Guardian Attorney Holder Signatories Others 3. Father’s Name : 4. Mother’s Name : 5. Spouse Name : 6. Nationality :

7. Date of Birth : 8. Gender : please mark(√) 9. Occupation (With Designation) : 10. National ID Number (if any) : 11. Passport Number(if any) : 12. Tax ID Number-TIN (if any) : Zone Circle 13. Driving License No. (if any) : 14. Present Address (Residence) : 15. Permanent Address : 16. Business Address : Male Female

17. Contact No. : Telephone : Home: Office: 18. Mobile : e-mail : Fax : Credit Card Information Issuing institution and card number (if the customer is a card user) 1. 2. 19. Residential status-please mark (√) : Resident Non Resident (The Bank will collect information according to the Guidelines for Foreign Exchange Transaction.) Signature & Date

Transaction Profile Account Title : Type of Account : Account/ Reference Number: Particulars Number of Transaction (monthly) Highest Transaction Amount (each transaction) Total Amount (monthly) Deposit: Cash deposit (including online) Deposit through transfer/ instrument Foreign remittance deposit Export income Others (specific) . Total Deposit Withdrawal: Cash withdrawal (including online and ATM) Repay through transfer/ instrument Foreign remittance withdrawal Export expe Others (specific) . Total Withdrawal Source of fund to transact: I/We the undersigned ensure that the transaction profile given above is a usual of

myself/organization. I/We further confirm that the transaction profile will be rectified/updated as and when required. Signature : Signature : Name : Name : Designation : Designation : Date : Date : KYC Profile Form (Applicable for Individual & Institutional Account) 1. Account Title: 2. Account Type: 3. Account / Reference Number: 4. Account Opening Official’s Name: 5. Nature of Business and Source of Fund: 6. Please mention how the source of fund of the client is authenticated. Also describe whether transactions of the client are consistent with

the concerned business detailing the nature thereof in establishing business relationship. 7. Information about the true Beneficial Owner (in case of company, detailed information of the controlling shareholder and the individual holding 20% or more of the total shares): 8. Passport Number : Whether photocopy obtained ? Yes/No (Where Applicable) 9. Voter ID Card No. : Whether photocopy obtained ? Yes/No (Where Applicable) 10. National ID No. : Whether photocopy obtained ? Yes/No (Where Applicable) 11. TIN : Whether photocopy obtained ? Yes/No (Where

Applicable) 12. VAT Registration No. : Whether photocopy obtained ? Yes/No (Where Applicable) 13. Driving License No. : Whether photocopy obtained ? Yes/No (Where Applicable) 14. Please confirm the reason for opening account by Non Resident and Foreigner. Type of Visa (Resident / Work) Occupation of the client/ the organization is engaged in : 15. Sl No. Nature Jewellery Goldsmith Money Changer /Currier Service Agent Real Estate Agent Promoter of Construction Project Off-shore Corporation Painting/Antique Dealer 01. 02. 03. 04. 05. 06. 07. 08. 09. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. Owner of Restaurant/Bar/Night Club/Residential Hotel Import/Export Agent Cash Investor (Tk. 25, 00000 monthly) Share /Stock Dealer Manpower Export Business Floating Business Film Producing / Distribution

Agencies Arms Business Mobile Phone Operator Business investing fund above Tk. 1 Crore per annum Travel Agent Transport Business Automobile dealer (Recondition Car) Leasing /Finance Company Freight / Shipping / Cargo Agent Risk Level Score High High High High High High High High High High High High High High High High High Medium Medium Medium Medium 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 4 4 3 3 3 3 Sl No. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. Nature Risk Level Score Insurance / Brokerage Agency Religious Institution / Organization Amusement Institution / Park Motors parts Business Tobacco and Cigarette Business Automobile Dealer (New Car) Shop Owner (Retail) Business-Agent Small Business(Yearly turnover less than Tk. 50 Lac) Self- employed professional Corporate Customer House Construction Materials Business Computer / Mobile Phone Dealer Software Business Manufacturer (except Arms) Retired Service Holder Service Student House wife

Farmer Medium Medium Medium Medium Medium Low Low Low Low Low Low Low Low Low Low Low Low Low Low Low 3 3 3 3 3 2 2 2 2 2 2 2 2 1 1 0 0 0 0 0 Others (Bank will determine the risk score according to business nature) (The upper limit in table 16-21 will be treated to belong to the same category. For Example: Tk 5000 lac shall be included in the limit of Tk 0-50) 16. Amount of the Customer’s Net Worth 17. The way of opening the Account Amount (in Tk) Risk Level Risk Rating Opened through Risk Level 1-50 Lac Low 0 Relationship manager/branch Low Risk Rating 0 50 Lac- 2 Crore Medium 1 Direct sales agent Medium 1 >2 Crore High 3 Internet High 3 Uncalled/self initiative High 3 18. Amount of monthly transaction: Amount of Current Account transaction (Tk. In Lac) 0-10 10-50 >50 Amount of Savings Account transaction (Tk. In Lac) 0-5 5-20 >20 Risk Level Risk Rating Low Medium High 0 1 3 0-20 20-50 >50 Risk Level Low Medium High 0 1 3

Savings Account transaction (Tk. In Lac) 0-2 2-7 >7 Risk Level Low Medium High 0 1 3 Risk Level Low Medium High 0 1 3 19. Number of monthly transaction: Number of Current Account transaction 0-100 100-250 >250 Number of Savings Account transaction Risk Rating 20. Amount of monthly cash transaction: Current Account transaction (Tk. In Lac) 0-10 10-25 >25 Risk Rating 21. Number of monthly cash transaction: Number of Current Account transaction 0-15 15-30 >30 Number of Savings Account transaction 0-5 5-10 >10 Risk Rating 22.Overall Risk Assessment: Risk Rating >=14 <14 Risk Level High Low Comments: (In spite of risk rating below 14 a customer may be treated to belong to high risk level under subjective consideration mentioning the reason thereof). 23. Whether the address/s of the account holder is/are verified? 24. If reply is positive then mention the way of the verification: 25. Politically Exposed Person (PEPs): (According to the AML

circular-14) a. b. Whether approval of the Senior Management is accorded?- Yes/ No Sources of Assets . . c. Whether face to face interview with the client is held ?- Yes/ No 26. Prepared by: (Account Opening Officer/ Relationship Manager) Authenticated by: (Branch Manager/ Branch Operation Chief) Signature (Seal): Name : Date : Signature (Seal) : Name : Date : When was the account related information Reviewed & Updated last? Reviewed and Updated by : Designation : Signature : Name : Date : KYC Profile Form (Applicable for Special Scheme/Fixed Deposit Account) 1. Account Title: 2. Account Type: 3. Account / Reference Number: 4. Account Opening Official’s Name:

5. What are the Sources of Funds? Describe how the sources of funds have been verified (where applicable): 6. Information about the true Beneficial Owner (in case of company, detailed information of the controlling shareholder and the individual holding 20% or more of the total shares): 7. Passport Number : Whether photocopy obtained ? Yes/No (Where Applicable) 8. Voter ID Card No. : Whether photocopy obtained ? Yes/No (Where Applicable) 9. National ID No. : Whether photocopy obtained ? Yes/No (Where Applicable) 10. TIN :

Whether photocopy obtained ? Yes/No (Where Applicable) 11. VAT Registration No. : Whether photocopy obtained ? Yes/No (Where Applicable) 12. Driving License No. : Whether photocopy obtained ? Yes/No (Where Applicable) 13. What is the client (Occupation)? Mention the Occupation of the client in detail: Comments (if any): (* Here comment may be passed about the risk level of the client under subjective consideration) Signature, Seal and Date Account Opening Officer/ Relationship Manager Signature, Seal and Date Authorised Officer Terms and conditions for operation of accounts with Bank Asia Limited This Is an agreement between account holders (the Customer") and Bank Asia Limited ("Bank Asiaor the Bank") setting forth the terms and conditions for each account with Bank Asia By signing an account application i signature card or by

using an account, the Customer agrees to be bound by these terms and conditions, as amended from time to time. I GOVERNING LAW, REGULATIONS AND RULES Account and all related transactions are governed by applicable law and regulation of Bangladesh, operating circulars, the rules of any clearing house or similar association to which Bank Asia* may belong and ge commercial bank practices applicable to the services in connection with the accounts 2. CREDITS TO THE ACCOUNTS Each deposited cheque, draft, acceptance or other instrument (an "item"), including cash letter items, and each other instruction, order, electronic funds transfer or advice received for credit to an account is credited subject final payment. Bank Asia decides what process will be used to obtain final payment of an Item and may use other banks in the process The amount of any deposited item including cash letter items, returned unpaid to reason will be debited for the amount so credited with charges and

interest (if any), to the appropriate account unless otherwise agreed in writing 3. TELEGRAPHIC/ELECTRONIC FUND TRANSFER There may be certain types of fund transfer for which a customer may wish to specify the payment system in its instruction to the Bank. In such cases, the Bank will attempt to execute the instructions as specified b Customer. Bank Asia reserves the right to route the funds transfer via any means available in order to execute the transfer instructions on the specified payment date Neither the Bank nor subsequent banks in the process necessarily investigate discrepancies between names and identifying or account numbers and may execute instructions on the basis of the number given in the instructions even if such number identifies a person diff from the named bank or beneficiary. 4. ORDERS TO STOP PAYMENT OR AMEND INSTRUCTIONS Generally, a Customer may place a stop payment order on an item it has issued, provided that the Bank has a reasonable opportunity to act on such

order. Only an authorised or his or her authorised designee may place a payment order, which must specify the account number, the payee, the issue date, the exact amount and the serial number of the item. A stop payment order placed after an item has been certified, issued or paid by the is ineffective. The Customer must furnish the Bank with a written order to stop payment which describes the item as set forth above 5. PERIODIC STATEMENTS AND ADVICES Customers may choose to receive account statements (a "Statement*) monthly, half yearly or yearly. The Customer hereby agrees to promptly notify the Bank of the failure to receive an expected Statement or advice, and promptly examine any Statement or advice received and to notify the Bank In writing, within fifteen (15) calendar days after the Statement or advice is mailed, transmitted, or otherwise made available to the Customer c errors, discrepancies or irregularities, including, but not limited to, unauthorised or altered

signatures or amounts, unauthorized transfers or withdrawals of funds. 6 OVERDRAFTS The Customer hereby authorises Bank Asia to charge interest on the amount of any overdraft or us account during the continuance of such overdraft at the prevailing rate charged on lending by the Bank during the pen the overdraft unless otherwise agreed. Unless otherwise agreed to in writing, Bank Asia is under no obligation to permit any overdraft or to continue to permit any overdraft and may any time require payment Outstanding overdraft allowed temporarily during the course of business. 7. FEES The Customer hereby agrees to pay. and hereby authorises the Bank to charge to any account of the Customer, all fees and charges incurred from time to lime for any services provided and to set off and apply, as nece amounts in any such account to satisfy any obligation owing by the Customer to the Bank. 8 AUTHORISED INDIVIDUALS Bank Asia Limited is hereby authorised to rely upon any document delivered by the

Customer to Bank Asia which indicates that an individual is authorised to act on the Customers behalf 9. BALANCE INFORMATION The Customer hereby waives any claim against Bank Asia based on oral representations made to any representative of the Customer regarding balance information provided by Bank Asia Limited 10. TERMINATION OF THE ACCOUNT The Customer or Bank Asia may close an account or any related service at any time. The Customer shall receive any finally collected and available balance after recovery charge of alt dues to tbe Bank in the account as e time it is closed. Bank Asia may return unpaid any items presented on a closed account II EXCHANGE OF INFORMATION Although It Is the Banks policy to treat Customer information with the greatest of confidence and discretion, in the absence of any agreement to the contrary. Bank Asia Limited and its branches reserves the right to e*cf among themselves information about a Customer and any or all of its accounts The Bank, at its sole

discretion, may make and retain recordings of telephone conversations between the Customer and the Bank Autr granted by this provision shall survive the termination of this Agreement or the closing of the account. 12. CHANGES TO THESE TERMS AND CONDITIONS Bank Asia Limited may, at any time, as it deems necessary, add to. delete from or change these terms and conditions Bank Asia will attempt, but is not required to provide prior notice of such changes; notice, if provxJi ordinary mail, shall be deemed sufficient. Changes to these terms and conditions required by law will be implemented immediately or as required by law 13. FORCE MAJEURE To the extent Bank Asias performance of any service m connection with an account is prevented, hindered, delayed or otherwise made Impracticable by reason of an act of God, catastrophe, war, crvrl or industrial disturb electrical, mechanical, communications or computer failure or any other cause beyond Banks control and that cannot be overcome by

reasonable diligence and without unusual expense, Bank Asia shall be excused from performance The Bank shall not be liable for any loss or any damage attributable to such failure of or delay in performance. 14. GENERAL INDEMNIFICATION Customer hereby agrees to indemnify and hold Bank Asia, its successors, assigns, correspondents, directors, officers, employees and agents harmless from and against all loss, costs, damages, expenses (including legal and liability for any claim or demand based in whole or in part of an action or omission of Bank Asia resulting from a request, direction, instruction from the Customer, Including claims, or demands expressly based cv alleged negligence of the Bank. This indemnity shall not relieve and indemnity Bank Asia from and against its gross negligence or willful misconduct 15. MINIMUM BALANCE AND INTEREST PAYMENT The minimum balance as prescribed from time to time is required to be maintained in current, savings and STD account. The Bank reserves the

right to change the minimum balance requirement and/or to close account with prior notice if the balance falls below this amount For interest bearing accounts the rate of interest may be changed from time to time. Any change in interest rale will be displayed in the branches 16 DOCUMENTATION The Customer must observe proper documentation formalities before opening an account with the Sank. Each account holder needs to submit the following: (a) 2 Copies of passport size recent photograph attested by the introducer. (b) Signature Card duly signed A/C Opening Form duly filled in Any other document required by the Bank from time to time. Additional documentation and formalities to be observed before opening the account for the following entities: For Limited Companies (a) Certified true copy or Memorandum and Ankles of Association. (b) Certified true copy of certificate or Incorporation 10 Certified copy of Certificate of Commencement of Business. (d)Copy of ihe Resolution of ihe Board of

Directors authorising for opening account and specimen Signatures for operation for operation of the Account duly attested by the Chairperson. (e) Latest Audited Balance Sheet (f) Trade License. (g)TIN Certificate For Partnership Enterprises (a) Certified copy of the constitution of the firm. (b) Registered Partnership Deed/duly Notarised Partnership Deed at Will (in case of Unregistered firm) For Association/Club/Society/Charity etc. (a) Minutes of Ihe Committee meeting authorising the opening of an account with the Bank duly certified by ihe Secretary and the Chairperson (b) A copy of Laws and Bye-Laws/Constitution duly attested by proper authority. (c) A copy of the resolution of the Committee authorising specific Signatories lo operate the account (d) Certificate of Registration, where applicable. For Proprietorship Enterprise (a) Trade License. (b) TIN. Certificate GBF-01 (2nd Revision) Feb. 2009 Account Opening Form Institutional Account □ Current Account □ □ Short

Term Deposit Account □ □ Savings Accounts □ □ Fixed Deposit Account □ □ Others. Name A/c No Customer Id : : : Account Opening Form - Institutional Account Photograph of the A/C Holder(s) Date: D D M M Y Y Y Y The Manager Bank Asia Ltd. Branch Account No : Customer ID: Dear Sir, l/we am/are applying to open an account in the following type with your Branch. 1/ we are providing the detailed information below: 1. Account Title : Name of the Account 2. Organization’s Type : Please mark (√ ) 3. Type of Account : Savings A/c Current A/c Short term Deposit A/c Fixed Deposit A/c FC NFCD RFCD Others Taka Dollar Euro Pound Others Taka Dollar Euro Pound Others Please mark (√ : ) 4. Currency Please mark (√ ) 5. Organization’s Address : a) Registered Address : b) Business/Office Address :

c) Factory Address : 6. Trade License No : Date Issuing Authority : : 8. Registration Number : Date 9. Tax ID Number (TIN) : 10. VAT Registration Number : : 7. Registration Authority and Country (applicable in both local and foreign) (If any) 11. Nature of Business (Details) 12. Account with other Bank(s)(if any) : Bank’s Name a. Branch a. Types of Account [Please mark( √)] Deposit A/C Loan A/C Others b. b. Deposit A/C Loan A/C Others c. c. Deposit A/C Loan A/C Others

13. Introducer’s Information : The introducer must be an account holder with the bank or an officer of the bank who is authorised to sign on behalf of the bank a. Name: b. Account no: Branch: c. Signature: 14. Initial Deposit : 15. FDR related Information : Date: Amount Amount : Currency : : Date of Maturity : Tenure Renew Principal & Interest Renew Principal Only Renew Principal Only, Credit Interest to A/C No 16. Special Scheme Information Not Applicable : Scheme’s Name : Tenure: One time payment/Installment Amount : No. of Installment (annual) : Payment on maturity :

Monthly Payment : (Amount payable as shown above is an assumption. Actual amount may differ as per Mudaraba Principle) 17. Link A/C : (with authorization to debit/credit) 18. Source of Fund : 15. Declaration and Signature: I/We hereby acknowledge that l/we have read the terms and conditions in connection with the account and agree to be bound by such terms and conditions. I/We also declare that the above information is true In addition to the above l/we will provide all sorts of information/ document as per your requirement. Signature, Name, Designation and date 1 2 3 Computer Coding This section is meant for Computer coding, SBS reporting, data maintenance, other reporting FOR

BANK’S USE ONLY Customer ID No. Account Title Account No. SBS Code Account Type Currency Customer Type Analysis Res. Economic Code Account opened by : Approved by : Name Name Branch Seal Desig. Desig Personal Information (This form is to be attached with the main form) Date : Account No : D D M M Y Y Y Y Customer ID: 1. Name of the A/C holder 2. Relation with the account : Please mark (√) 1st Applicant 2nd Applicant 3rd Applicant Director Partner Minor Guardian Attorney Holder Signatories Others 3. Father’s Name : 4. Mother’s Name : 5. Spouse Name :

6. Nationality : 7. Date of Birth : 8. Gender : please mark(√) 9. Occupation (With Designation) : 10. National ID Number (if any) : 11. Passport Number(if any) : 12. Tax ID Number-TIN (if any) : Zone Circle 13. Driving License No. (if any) : 14. Present Address (Residence) : 15. Permanent Address : 16. Business Address : Male Female

17. Contact No. : Telephone : Home: Office: 18. Mobile : e-mail : Fax : Credit Card Information Issuing institution and card number (if the customer is a card user) 1. 2. 19. Residential status-please mark (√) : Resident Non Resident (The Bank will collect

information according to the Guidelines for Foreign Exchange Transaction.) Signature & Date Transaction Profile Account Title : Type of Account : Account/ Reference Number : Particulars Number of Transaction (monthly) Highest Transaction Amount (each transaction) Total Amount (monthly) Deposit: Cash deposit (including online) Deposit through transfer/ instrument Foreign remittance deposit Export income Others(specific) . Total Deposit Withdrawal: Cash withdrawal (including online and ATM) Repay through transfer/ instrument Foreign remittance withdrawal Export expe Others(specific) . Total withdrawal Source of fund to transact:

I/We the undersigned ensure that the transaction profile given above is a usual of myself/organization. I/We further confirm that the transaction profile will be rectified/updated as and when required. Signature : Signature : Name : Name : Designation : Designation : Date : Date : KYC Profile Form (Applicable for Individual & Institutional Account) 1. Account Title: 2. Account Type: 3. Account / Reference Number: 4. Account Opening Official’s Name: 5. Nature of Business and Source of Fund: 6. Please mention how the source of fund

of the client is authenticated. Also describe whether transactions of the client are consistent with the concerned business detailing the nature thereof in establishing business relationship. 7. Information about the true Beneficial Owner (in case of company, detailed information of the controlling shareholder and the individual holding 20% or more of the total shares): 8. Passport Number : Whether photocopy obtained ? Yes/No (Where Applicable) 9. Voter ID Card No. : Whether photocopy obtained ? Yes/No (Where Applicable) 10. National ID No. : Whether photocopy obtained ? Yes/No

(Where Applicable) 11. TIN : Whether photocopy obtained ? Yes/No (Where Applicable) 12. VAT Registration No. : Whether photocopy obtained ? Yes/No (Where Applicable) 13. Driving License No. : Whether photocopy obtained ? Yes/No (Where Applicable) 14. Please confirm the reason for opening account by Non Resident and Foreigner. Type of Visa (Resident / Work) Occupation of the client/ the organization is engaged in : 15. Sl No. 01. 02. 03. 04. 05. 06. 07. 08. 09. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. Nature Jewellery Goldsmith Money Changer /Currier Service Agent Real Estate Agent Promoter of Construction Project Off-shore Corporation Painting/Antique Dealer Owner of Restaurant/Bar/Night Club/Residential Hotel Import/Export Agent Cash Investor (Tk. 25,

00000 monthly) Share /Stock Dealer Manpower Export Business Floating Business Film Producing / Distribution Agencies Arms Business Mobile Phone Operator Business investing fund above Tk. 1 Crore per annum Travel Agent Transport Business Automobile dealer (Recondition Car) Leasing /Finance Company Freight / Shipping / Cargo Agent Risk Level Score Sl No. High High High High High High High High High High High High High High High High High Medium Medium Medium Medium 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 4 4 3 3 3 3 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. Nature Insurance / Brokerage Agency Religious Institution / Organization Amusement Institution / Park Motors parts Business Tobacco and Cigarette Business Automobile Dealer (New Car) Shop Owner (Retail) Business-Agent Small Business(Yearly turnover less than Tk. 50 Lac) Self- employed professional Corporate Customer House Construction Materials Business Computer / Mobile Phone Dealer Software

Business Manufacturer (except Arms) Retired Service Holder Service Student House wife Farmer Others (Bank will determine the risk score according to business nature) Risk Level Score Medium Medium Medium Medium 3 3 3 3 Medium Low Low Low Low Low Low Low Low Low Low Low Low Low Low Low Low 3 2 2 2 2 2 2 2 2 1 1 0 0 0 0 0 (The upper limit in table 16-21 will be treated to belong to the same category. For Example: Tk 5000 lac shall be included in the limit of Tk 0-50) 16. Amount of the Customer’s Net Worth 17. The way of opening the Account Amount (in Tk) Risk Level Risk Rating Opened through Risk Level Risk Rating 1-50 Lac Low 0 Relationship manager/branch Low 0 50 Lac- 2 Crore Medium 1 Direct sales agent Medium 1 >2 Crore High 3 Internet High 3 Uncalled/self initiative High 3 18. Amount of monthly transaction: Amount of Current Account transaction (Tk. In Lac) 0-10 10-50 >50 Amount of Savings Account transaction (Tk. In Lac) 0-5 5-20

>20 Risk Level Risk Rating Low Medium High 0 1 3 0-20 20-50 >50 Risk Level Low Medium High 0 1 3 Savings Account transaction (Tk. In Lac) 0-2 2-7 >7 Risk Level Low Medium High 0 1 3 Risk Level Low Medium High 0 1 3 19. Number of monthly transaction: Number of Current Account transaction 0-100 100-250 >250 Number of Savings Account transaction Risk Rating 20. Amount of monthly cash transaction: Current Account transaction (Tk. In Lac) 0-10 10-25 >25 Risk Rating 21. Number of monthly cash transaction: Number of Current Account transaction 0-15 15-30 >30 Number of Savings Account transaction 0-5 5-10 >10 Risk Rating 22.Overall Risk Assessment: Risk Rating >=14 <14 Risk Level High Low Comments: (In spite of risk rating below 14 a customer may be treated to belong to high risk level under subjective consideration mentioning the reason thereof). 23. Whether the address/s of the account holder is/are verified? 24. If reply is positive then

mention the way of the verification: 25. Politically Exposed Person (PEPs): (According to the A.Ml circular-14) a. b. Whether approval of the Senior Management is accorded?- Yes/ No Sources of Assets . . c. Whether face to face interview with the client is held ?- Yes/ No 26. Prepared by: (Account Opening Officer/ Relationship Manager) Authenticated by: (Branch Manager/ Branch Operation Chief) Signature (Seal): Name : Date : Signature (Seal) : Name : Date : When was the account related information Reviewed & Updated last? Reviewed and Updated by : Designation : Signature : Name : Date : KYC Profile Form (Applicable for Special Scheme/Fixed Deposit Account) 1. Account Title: 2. Account Type: 3. Account / Reference Number:

4. Account Opening Official’s Name: 5. What are the Sources of Funds? Describe how the sources of funds have been verified (where applicable): 6. Information about the true Beneficial Owner (in case of company, detailed information of the controlling shareholder and the individual holding 20% or more of the total shares): 7. Passport Number : Whether photocopy obtained ? Yes/No (Where Applicable) 8. Voter ID Card No. : Whether photocopy obtained ? Yes/No (Where Applicable) 9. National ID No. :

Whether photocopy obtained ? Yes/No (Where Applicable) 10. TIN : Whether photocopy obtained ? Yes/No (Where Applicable) 11. VAT Registration No. : Whether photocopy obtained ? Yes/No (Where Applicable) 12. Driving License No. : Whether photocopy obtained ? Yes/No (Where Applicable) 13. What is the client (Occupation)? Mention the Occupation of the client in detail: Comments (if any): (* Here comment may be passed about the risk level of the client under subjective consideration) Signature, Seal and Date Account Opening Officer/ Relationship Manager Signature, Seal and Date Authorised Officer Terms and conditions for operation of accounts with Bank Asia Limited This Is an agreement between account holders (the Customer") and Bank Asia Limited ("Bank Asiaor the Bank") setting forth the terms

and conditions for each account with Bank Asia By signing an account application i signature card or by using an account, the Customer agrees to be bound by these terms and conditions, as amended from time to time. I GOVERNING LAW, REGULATIONS AND RULES Account and all related transactions are governed by applicable law and regulation of Bangladesh, operating circulars, the rules of any clearing house or similar association to which Bank Asia* may belong and ge commercial bank practices applicable to the services in connection with the accounts 2. CREDITS TO THE ACCOUNTS Each deposited cheque, draft, acceptance or other instrument (an "item"), including cash letter items, and each other instruction, order, electronic funds transfer or advice received for credit to an account is credited subject final payment. Bank Asia decides what process will be used to obtain final payment of an Item and may use other banks in the process The amount of any deposited item including cash

letter items, returned unpaid to reason will be debited for the amount so credited with charges and interest (if any), to the appropriate account unless otherwise agreed in writing 3. TELEGRAPHIC/ELECTRONIC FUND TRANSFER There may be certain types of fund transfer for which a customer may wish to specify the payment system in its instruction to the Bank. In such cases, the Bank will attempt to execute the instructions as specified b Customer. Bank Asia reserves the right to route the funds transfer via any means available in order to execute the transfer instructions on the specified payment date Neither the Bank nor subsequent banks in the process necessarily investigate discrepancies between names and identifying or account numbers and may execute instructions on the basis of the number given in the instructions even if such number identifies a person diff from the named bank or beneficiary. 4. ORDERS TO STOP PAYMENT OR AMEND INSTRUCTIONS Generally, a Customer may place a stop

payment order on an item it has issued, provided that the Bank has a reasonable opportunity to act on such order. Only an authorised or his or her authorised designee may place a payment order, which must specify the account number, the payee, the issue date, the exact amount and the serial number of the item. A stop payment order placed after an item has been certified, issued or paid by the is ineffective. The Customer must furnish the Bank with a written order to stop payment which describes the item as set forth above 5. PERIODIC STATEMENTS AND ADVICES Customers may choose to receive account statements (a "Statement*) monthly, half yearly or yearly. The Customer hereby agrees to promptly notify the Bank of the failure to receive an expected Statement or advice, and promptly examine any Statement or advice received and to notify the Bank In writing, within fifteen (15) calendar days after the Statement or advice is mailed, transmitted, or otherwise made available to the

Customer c errors, discrepancies or irregularities, including, but not limited to, unauthorised or altered signatures or amounts, unauthorized transfers or withdrawals of funds. 6 OVERDRAFTS The Customer hereby authorises Bank Asia to charge interest on the amount of any overdraft or us account during the continuance of such overdraft at the prevailing rate charged on lending by the Bank during the pen the overdraft unless otherwise agreed. Unless otherwise agreed to in writing, Bank Asia is under no obligation to permit any overdraft or to continue to permit any overdraft and may any time require payment Outstanding overdraft allowed temporarily during the course of business. 7. FEES The Customer hereby agrees to pay. and hereby authorises the Bank to charge to any account of the Customer, all fees and charges incurred from time to lime for any services provided and to set off and apply, as nece amounts in any such account to satisfy any obligation owing by the Customer to the Bank. 8

AUTHORISED INDIVIDUALS Bank Asia Limited is hereby authorised to rely upon any document delivered by the Customer to Bank Asia which indicates that an individual is authorised to act on the Customers behalf 9. BALANCE INFORMATION The Customer hereby waives any claim against Bank Asia based on oral representations made to any representative of the Customer regarding balance information provided by Bank Asia Limited 10. TERMINATION OF THE ACCOUNT The Customer or Bank Asia may close an account or any related service at any time. The Customer shall receive any finally collected and available balance after recovery charge of alt dues to tbe Bank in the account as e time it is closed. Bank Asia may return unpaid any items presented on a closed account II EXCHANGE OF INFORMATION Although It Is the Banks policy to treat Customer information with the greatest of confidence and discretion, in the absence of any agreement to the contrary. Bank Asia Limited and its branches reserves the right to

e*cf among themselves information about a Customer and any or all of its accounts The Bank, at its sole discretion, may make and retain recordings of telephone conversations between the Customer and the Bank Autr granted by this provision shall survive the termination of this Agreement or the closing of the account. 12. CHANGES TO THESE TERMS AND CONDITIONS Bank Asia Limited may, at any time, as it deems necessary, add to. delete from or change these terms and conditions Bank Asia will attempt, but is not required to provide prior notice of such changes; notice, if provxJi ordinary mail, shall be deemed sufficient. Changes to these terms and conditions required by law will be implemented immediately or as required by law 13. FORCE MAJEURE To the extent Bank Asias performance of any service m connection with an account is prevented, hindered, delayed or otherwise made Impracticable by reason of an act of God, catastrophe, war, crvrl or industrial disturb electrical, mechanical,

communications or computer failure or any other cause beyond Banks control and that cannot be overcome by reasonable diligence and without unusual expense, Bank Asia shall be excused from performance The Bank shall not be liable for any loss or any damage attributable to such failure of or delay in performance. 14. GENERAL INDEMNIFICATION Customer hereby agrees to indemnify and hold Bank Asia, its successors, assigns, correspondents, directors, officers, employees and agents harmless from and against all loss, costs, damages, expenses (including legal and liability for any claim or demand based in whole or in part of an action or omission of Bank Asia resulting from a request, direction, instruction from the Customer, Including claims, or demands expressly based cv alleged negligence of the Bank. This indemnity shall not relieve and indemnity Bank Asia from and against its gross negligence or willful misconduct 15. MINIMUM BALANCE AND INTEREST PAYMENT The minimum balance as prescribed

from time to time is required to be maintained in current, savings and STD account. The Bank reserves the right to change the minimum balance requirement and/or to close account with prior notice if the balance falls below this amount For interest bearing accounts the rate of interest may be changed from time to time. Any change in interest rale will be displayed in the branches 16 DOCUMENTATION The Customer must observe proper documentation formalities before opening an account with the Sank. Each account holder needs to submit the following: (a) 2 Copies of passport size recent photograph attested by the introducer. (b) Signature Card duly signed A/C Opening Form duly filled in Any other document required by the Bank from time to time. Additional documentation and formalities to be observed before opening the account for the following entities: For Limited Companies (a) Certified true copy or Memorandum and Ankles of Association. (b) Certified true copy of certificate or

Incorporation 10 Certified copy of Certificate of Commencement of Business. (d)Copy of ihe Resolution of ihe Board of Directors authorising for opening account and specimen Signatures for operation for operation of the Account duly attested by the Chairperson. (e) Latest Audited Balance Sheet (f) Trade License. (g)TIN Certificate For Partnership Enterprises (a) Certified copy of the constitution of the firm. (b) Registered Partnership Deed/duly Notarised Partnership Deed at Will (in case of Unregistered firm) For Association/Club/Society/Charity etc. (a) Minutes of Ihe Committee meeting authorising the opening of an account with the Bank duly certified by ihe Secretary and the Chairperson (b) A copy of Laws and Bye-Laws/Constitution duly attested by proper authority. (c) A copy of the resolution of the Committee authorising specific Signatories lo operate the account (d) Certificate of Registration, where applicable. For Proprietorship Enterprise (a) Trade License. (b) TIN. Certificate

GBF-01 (2nd Revision) Feb. 2009