December 2018Fintelekt

AML Quarterly Newsletter

Improving Trade-Based Money Laundering Controls

SURVEY

AML Process Maturity in the Philippines Banking Industry

KEY TAKEAWAYS

Fintelekt’s AML Chapter Meeting in Dhaka

SPOTLIGHT

Thailand’s AML/CFT Regime

Welcome to the third edition of the AMLQuarterly Newsletter, Fintelekt’spublication designed to bring to you thelatest trends, regulatory updates, newsand views related to anti-moneylaundering and countering of terroristfinancing (AML/CFT).

This edition features an article based onFintelekt's latest research report onTrade-Based Money Laundering (TBML).We review the AML Process Maturity inthe Philippines banking industry. We alsofeature a round-up of Fintelekt's AMLChapter Meeting in Dhaka, Bangladesh.

We are also proud to bring you updatesbased on Fintelekt’s activities in AML/CFTeducation, research and training withinSouth Asia as well as country summary ofthe financial sector and AML regime inThailand.

If you would like to contribute articles,whitepapers, or a point of view related tothe subject of anti-money laundering,please send it to me atarpita@fintelekt.com and it will beconsidered for inclusion in the next issueof the newsletter.

We hope you enjoy reading this issue!

EditorArpita BedekarDirector – MarketingFintelekt Advisory Services

EDITOR’S NOTE

CONTENTS

COVER STORY 3

Improving Trade-Based Money Laundering Controls in India

SURVEY 7

AML Process Maturity in the Philippines Banking Industry

KEY TAKEAWAYS 10

Fintelekt Chapter Meeting - Dhaka

ANNOUCEMENTS 14

FCAP Hall of Fame

COUNTRY SUMMARY 16

Thailand

NEWS 18

Asia Regulatory Updates

Improving Trade-Based Money Laundering Controls in India

The report pointed to disparities

across existing systems and

processes for combating TBML

within the banking industry in India,

as well as the need for industry-wide collaboration on

improving information-

sharing.

In December 2018, Fintelekt published a researchreport on “The State of Trade-Based Money LaunderingControls in India” to understand the progress inimplementation of TBML controls among banks,highlight the challenges and discuss the way forward forthe industry.

Some areas of improvement that emerged from thereport are as follows:

Need for Targeted Regulatory Oversight

Depending upon the overall maturity of the banks’ AMLprogramme, some banks such as foreign banks, Indianprivate sector banks, and some of the larger public-

3

There is an urgent need for stricter

and more targeted regulatory

oversight in the area of TBML and levying of higher

penalties to act as a suitable

deterrent for banks to enhance

their TBML monitoring

programmes and bring all banks on

to a common baseline on TBML

controls.

sector banks in India are distinctly ahead in terms ofassessing the threat, implementing TBML controlsand training their staff.

On the contrary, some of the smaller banks aregrappling with a multitude of challenges such as lackof senior managerial involvement, staff turnover,inadequate use of technology and automation in theAML transactions monitoring process. Knowingly orunknowingly, banks with relatively weaker TBMLcontrols pose a huge risk to the system, leading tomoney launderers and criminals taking undueadvantage and preying on the vulnerabilities.

There is an urgent need for stricter and moretargeted regulatory oversight in the area of TBMLand levying of higher penalties to act as a suitabledeterrent for banks to enhance their TBMLmonitoring programmes and bring all banks on to acommon baseline on TBML controls. Regulators canlook at enforcing certain minimum checks that allbanks must have in place to deter moneylaunderers from mis-using trade finance systems ofbanks with weaker controls.

Continuous Training and Knowledge Buildingwithin Banks

Trade finance is a highly specialised area ofknowledge and AML analysts dealing with TBMLalerts often find it difficult to understand complexdocumentation, products and pricing related issues.Without the right amount of knowledge, AMLcompliance teams will not be able to createguidelines and put processes in place to effectivelymonitor TBML within the organisation.

In public sector banks in particular, the size of theAML team is often disproportionately smallcompared to the size of the bank. To add to this, theprevalent system of transferring resources from onedepartment into another without a fixed tenure hascreated a serious lack of specialisation within theAML team. This has resulted in lower awareness ofthe TBML threat and therefore piecemealapplication of TBML controls.

Banks need to invest in continuous training to staffto make them aware of trade risks, as well asspecialised knowledge building within the AMLcompliance team.

COVER STORY

4

Use of latest technology will be a critical element inthe fight against TBML

Over the years, automation in a variety of processeswithin banks have allowed AML teams to scan millionsof transactions by applying RFIs and model scenariosbased on money laundering typologies. However, whenit comes to trade operations, the lack of standardisationin data and in many cases, manual data collection andstorage does not allow the same level of automation forTBML controls.

The main challenge for most banks is to integrate theirtrade operations and AML systems with the corebanking system so as to allow access to customer dataand profiles on a single platform. In most banks, thetrade operations system has not kept pace with thedevelopments on the core banking system and it is onlywhen these elements undergo upgradation that greaterautomation on TBML monitoring becomes a possibility.

Given the growing volume of trade and the number oftransactions, the use of technology is becomingincreasingly critical in areas such as real time screening,monitoring of shipments, detecting the presence ofdual use goods, as also making data comprehensivelyavailable for the AML analyst to make robust decisionswhile disposing of alerts.

Advances in technology, especially around big data andanalytics, can help connect the dots and anticipate andfight TBML. The improvement in big data technologycan allow organisations to consolidate their data fromdifferent systems across different lines of business in amore efficient and cost-effective manner. This providesthe organisations 360-degree view of their customerinformation.

Harmonisation across the System

Besides the measures needed at the level of each bank,there is an urgent need for harmonisation across thedifferent elements of the trade ecosystem – ports &customs authorities, airlines, shipping companies,domestic shipping companies / truckers, agents,commodity dealers, and other involved parties.

Currently, no single entity has complete visibility intothe trade transaction, creating limitations on the

COVER STORY

The main challenge for most banks is to integrate their trade operations and AML

systems with the core banking

system so as to allow access to

customer data and profiles on a single

platform.

5

Robust investments in resources and

technology, coupled with collaborative efforts by all

involved stakeholders can help the industry

improve their defences to trade-

based money laundering and

mis-use of trade finance systems.

controls that each involved party can exercise in theprocess. Digitalisation as well as effective informationsharing across all key elements includingdocumentation, verification of shipments, tracking, etc.will allow a unified view of each transaction to allinvolved players and thereby make detection ofirregularities more effectively possible.

For improved information sharing, the development ofa negative list or registry of individuals/ corporationswho have been involved in TBML could be considered.While sharing of information in good faith is commonamong banks, a central repository could bespearheaded by the regulatory bodies to make thesystem more formalised.

Going Forward

Trade is integral to the Indian economy. Indian exportstouched USD 221.8 billion in the April-August 2018period, increasing by 20.7 per cent over the sameperiod last year, as per data from the Ministry ofCommerce and Industry. Imports in the same periodwere USD 269.5 billion, growing 21 per cent over thesame period in the previous year.

Growing trade brings growing vulnerability to thecountry as the threat of TBML continues to rise. India’sposition as a key trading partner can be significantlyimpacted by weak TBML controls or lack of regulation.Robust investments in resources and technology,coupled with collaborative efforts by all involvedstakeholders can help the industry improve theirdefences to trade-based money laundering and mis-use of trade finance systems.

COVER STORY

To download the complete report, please visit:

http://fintelekt.com/files/documents/Fintelekt_State-of-

TBML-Controls_December-2018.pdf

6

AML Process

Maturity

The Philippines is currently undergoing

its third Mutual Evaluation to gauge

the country’s level of compliance with

international anti-money laundering

(AML) and combating the financing of terrorism (CFT)

standards.

A comprehensive AML/CFT processmaturity survey was conducted byFintelekt in May-June 2018 within thePhilippines banking industry to aid theunderstanding along parameters such asthe current state of AML compliance,compliance officers’ challenges andpriorities, benchmarking AML efforts inthe banking industry as well asunderstanding expected areas of supportfrom the Anti-Money Laundering Council(AMLC) Secretariat.

The survey covered, in detail, opinion onvarious current issues, and questions onprocesses related to governance andreporting, risk identification andassessment, technology, resources,training, and other issues.

Respondent banks included public banks,private banks as well as branches offoreign banks in the Philippines andrepresent roughly 30 per cent ofcommercial banks in the country.

Key highlights from the report arepresented here.

Philippines Banking Industry

SURVEY

7

Tone from the top needs to bestrengthened

Maintaining an optimal balance betweencompeting priorities of compliance andbusiness growth was identified by 65 percent AML compliance officers whoparticipated in the survey as the top-mostorganisational challenge, indicating a likelystruggle around bringing in compliantbusiness. 64 per cent compliance officersindicated that they feel the need for greatersenior managerial and Board levelinvolvement into AML compliance matters.

The tone from the top management andBoard of Directors will be critical to drivingthe entire organisation to respect AMLcompliance priorities. An active, involved,and knowledgeable board of directors isessential for the successful implementationof a robust AML compliance programme inany organisation.

Continuous investment in AML systemsand technology is required

The global AML landscape is challenging andcontinuously evolving. Technology andsystems will play a key role in ensuring thatorganisations are flexible and can adapt tochange. The level of technology usage forAML is reasonably high. Yet, 19 per centbanks are relying

SURVEY

on manual methods for KYC and CDD-related record keeping. 13 per cent conducttransaction monitoring manually. 26 percent conduct screening manually.

Further, 79 per cent compliance officersindicated that procuring/ enhancingtransactions monitoring systems was theirtop-most priority area for AML compliancespending over the next 1-2 years. Thissuggests that current systems are eitheroutdated, or incapable of meeting theorganisational requirements.

KYC and ongoing CDD are important areas of focus

Understanding of sources of customers’ funds was identified by 47 per cent respondents as a risk perceived as serious threat to the bank.

Most banks update high risk customer profiles often - 3 per cent compliance officers report that their banks update high risk customer profiles every six months, 85 per cent do it once in a year, another 9 per cent once in two years, with just 3 per cent refreshing high risk profiles once in three years.

Further, KYC reviews, update and maintenance has been listed as one of the priority areas for AML compliance spending by 68 per cent of compliance officers. Although banks in Philippines seem to be placing a lot of importance on updating and maintaining customer records, it is important that they identify the full range of relevant trigger events that may lead to a need to update customer records, rather than just doing it by default.

Periodic risk assessments will help identify gaps

Organisations would benefit from periodically assessing the adequacy of their AML monitoring systems and the

Yes, 64%

No, 36%

Do you think you need more support and involvement for AML compliance

from the senior executive management and Board of Directors?

8

benefits that a reassessment or subsequent refinement could bring. 27 per cent compliance officers indicated that their organisation has never undertaken an enterprise-wide AML risk assessment and need to undertake this on an urgent basis.

The rest of the participating organisations (73 per cent) have conducted this at some time in the last 1 to 3 years. Most banks in the Philippines recognise the benefits of continuous risk assessment, as 56 per cent indicated that conducting an enterprise-wide AML risk assessment was one of the priorities for AML compliance spending for them in the next 1-2 years.

Increase in human resource cost is anticipated

55 per cent of the organisations were seen to be operating with an average of five or fewer dedicated staff in the AML compliance team. However, 61 per cent compliance officers expect that to increase in the next year, affirming that AML compliance workloads will go up in the near future.

Consequently, spending on recruitment as well as provision of AML specific training for new team members will go up for these banks. Among the recruitment challenges -inadequate subject matter expertise and lack of practical experience

SURVEY

were cited as among the top hiring challenges for new employees by 48 per cent compliance officers.

Banks’ expectations from the AMLC are rising

The survey results suggest that banks would welcome greater guidance (chosen by 84 per cent of compliance officers), training (68 per cent) and knowledge-sharing in the form of wider publication of typologies and thematic reviews (58 per cent) from the AMLC.

68 per cent compliance officers rated the current level of guidance or support from the AMLC with respect to clarifications or help required in the last year as ‘Good’. The others felt the need for more outreach and hand-holding by the AMLC. 70 per cent compliance officers said that they do not receive feedback about STRs submitted by them to the AMLC, while 10 per cent said that the feedback that they receive is not enough.

The full report can be downloaded at:http://fintelekt.com/files/documents/Fintelekt-AML-Process-Maturity-Report-Philippines-2018.pdf

79%

68%

56%

38%

29%

18%

Procuring / enhancing transaction monitoring systems

KYC reviews, update and maintenance

Conducting an enterprise-wide AML risk assessment

Training of employees

Increasing the size of the internal compliance team

Procuring / enhancing screening lists

What are the organisation’s priority areas for AML compliance-related spending in the next 1-2 years?

9

Fintelekt Chapter Meeting - Dhaka

The first Fintelekt Bangladesh AML

Chapter meeting was hosted by Eastern

Bank in Dhaka recently.

In addition to its Annual AML Summit inevery country that it operates in, Fintelekthas started local AML Chapters to provideopportunities for senior bankers and thecompliance community to interact in aneutral environment with the purpose ofhaving discussions on a particular themewithin AML/CFT.

The chapter meeting was well attended by alarge number of CAMLCOs and seniormanagement from various categories ofbanks in Bangladesh.

In addition to understanding the strategicimportance of an industry initiative, thesefocused meetings also enable the bankingand financial services community tounderstand and address implementation andoperational issues collectively. An addedbenefit is an opportunity to learn frominternational companies that are in aposition to share global best practices.

The meeting was chaired by Shirish Pathak,Managing Director, Fintelekt AdvisoryServices, who highlighted the importance ofthe chapter meeting and introduced the key

Key Takeaways

REVIEW

10

issues that would be discussed in themeeting viz:

• Inherent risks in correspondent bankingrelationships

• Enhanced due diligence oncorrespondent banking partners

• Challenges of the WolfsbergCorrespondent Banking Due DiligenceQuestionnaire

• Ongoing monitoring and riskmanagement

According to Chowdhury MAQ Sarwar,Deputy Managing Director, Eastern Bank,the first speaker at the meeting, there existssubstantial worry within international banksthat the banking regulators in countries suchas Bangladesh are not as strict as othercountry regulators. It is possible that a lackof effective communication withinternational banks could be the source ofthe problem.

Sarwar also touched upon corporategovernance issues where more needs to bedone to strengthen the AML framework inbanks. The issue is compounded as typicallythe Chief AML Compliance Officers(CAMLCO) in most banks in Bangladesh havea broader role that is not restricted to justAML within the bank. With the Anti-Briberyand Corruption Act also expected soon,which will, no doubt, be very stringent,CAMLCOs will be expected to do even more.The agent banking and mobile bankingchannels are very vulnerable to moneylaundering and terrorist funding activitiesand has emerged as a significant concern.

Finally, Sarwar stressed that board andsenior management awareness on AMLissues, combined with a high level ofbusiness conduct is key to building asustainable banking business, with arealization that regulatory penalties willeventually wipe out any profits that aremade by cutting corners.

Swapan K Biswas, CAMLCO, Mutual TrustBank and General Secretary of theAssociation of Compliance Officers of Banks

REVIEW

in Bangladesh, and earlier with the AMLDepartment of Bangladesh Bank, who hasbeen involved in initiatives to strengthen theframework for preventing money launderingand countering the financing of terrorism inBangladesh for the last 17 years, was thenext speaker.

Recounting the AML initiatives in thecountry, starting from enactment of MoneyLaundering Prevention Act (MLPA) 2002, toformation of different national & regionalcommittees, national risk assessments,facing multiple mutual evaluations,Bangladesh getting out of the InternationalCooperation Review Group (ICRG) process,attaining membership of Egmont Group andfinally being nominated as the Co-Chair ofAPG for 2018-2020, Swapan re-affirmed thatBangladesh as a country is firmly commitedin the fight against money laundering andterrorist financing.

The Bangladesh Financial Intelligence Unit(BFIU) has proven itself over the years to bea successful organization with a team ofcompetent professionals and has, along withother government agencies and reportingorganizations, contributed significantly tobuilding an increasingly strong AML regimein Bangladesh.

There exists substantial worry within international banks

that the banking regulators in countries such as Bangladesh

are not as strict as other country regulators. It is

possible that a lack of effective communication with international banks could be

the source of the problem.

- Chowdhury MAQ Sarwar, Deputy Managing Director, Eastern Bank

11

One of the critical factors for a growingeconomy is international trade, andcorrespondent banking is the lifeblood ofthis global commerce as it facilitatesconnectivity among financial systems. But,according to Swapan, in the recent past, dueto close supervision of regulators,particularly in USA followed by imposition ofhuge fine on banks with active remedialplan, the global banks had set a differentstrategy and cut back on correspondentrelationships from the respondent banksthat do not generate sufficient volumes torecover compliance costs under the garb ofde-risking. As a result, a few global banks cutback their relationships with a fewestablished local banks of Bangladeshwithout actually having any de-risking orcompliance issue.

Swapan provided a detailed analysis of theimpact of the present correspondentbanking environment and highlighted thatforeign banks operating in Bangladeshgenerally use their own channels and usuallydepend upon their corporate correspondentbanking relationship to do internationaltrade business. At the same time, theseglobal banks spend more time and effort tosatisfy compliance issues, resulting inincreased transaction turnaround time.

Nationalized banks, having access to largecredit lines and extensive global networks,are reeling under non-performing loans,capital shortfall and other adverse mediareport, which are areas of deep concern forcorrespondent banks.

Private commercial banks (up to thirdgeneration) that have funded and/or non-funded credit lines from developmentinstitutions like Asian Development Bank(ADB), International Finance Corporations(IFC) under their various trade serviceprograms have a relative competitive edgein correspondent banking business ascompared to others. A few privatecommercial banks that are severelyimpacted due to discontinuation ofcorrespondent relationships by some globalbanks during 2008-2013 are now trying torecover their position effectively through

REVIEW

concentrating and availing regional banks’credit line to fill the gap.

Newly licensed private commercial banks(fourth generation) have faced severedifficulty in establishing correspondentrelationship during their initial years,especially in the first two years of theiroperation, as correspondent banks demandthe last three balance sheets as a “rule ofthumb” for setting up new relationship.

Swapan opined that to face the de-riskingissue, both global correspondent banks andlocal respondent banks, in presence of theirFIUs, need to discuss and come to aconsensus that global banks will understandthe reality of local market and providenecessary support to respondent banks tobetter comply with the due diligencerequirements. He concluded by saying thatwhile the country has the required acts,rules, guidelines and regulatory body withskilled human resources in place, what isrequired now is:i. the correct mindset at all levels to

establish a sincere compliance culture,a culture of just being compliant onpaper is not acceptable.

ii. favourable infrastructure for duediligence, with substantial costreduction as due diligence cost moneyand other resources

iii. adequate professionals to analyze thecompliance trends; high focus ontraining

iv. extended supervision both at micro andmacro level.

The final speaker was Sambit Mohanty,Country Manager – Bangladesh, Accuity, whomade an insightful presentation on De-Risking in Correspondent Banking. Sambitpointed out that global financial institutionsare increasingly terminating or restrictingbusiness relationships with remittancecompanies and smaller local banks in certainregions of the world, albeit in an unevenlydistributed manner, resulting in someregions being more affected than others.Smaller countries with limiting financialmarkets are particularly vulnerable to de-risking. With reference to Bangladesh, he

12

mentioned that nine local banks have beenparticularly adversely affected due to de-risking.

As per recent Accuity research, while thenumber of banks globally has increased, thenumber of correspondent relationships hasgone down. 55% of banking authorities havereported a decline in correspondentrelationships, and 75% of large banks havereported that they have withdrawn fromcorrespondent relationships.

Sambit further explained the adverse effectsof de-risking, such as the risk of smallcountries with limited financial marketsfacing the possibility of being completely cutoff from access to regulated financialservices and the resultant increase intransactions through unregulated parallelchannels. This financial exclusion has alsobeen recognized as a risk to financialintegrity of the banking system by theFinancial Action Task Force. In terms ofbusiness loss, the decrease in trade financeand cross border remittances obviouslyresults in loss of revenue, and also highlightsthe image of a country in a negative way,thus resulting in loss of foreign investments.

REVIEW

Sambit also explained in detail the variousfactors due to which there is loss ofcorrespondent banking relationships andhighlighted various important aspects of theWolfsberg Questionnaire for due diligence incorrespondent banking.

Sambit presented some recommendationsand said that banks must:

• Gather data on CBR closures and identifygaps in their plan, as well as include de-risking in the contingency plan

• Improve communication with their largecorrespondent banks to give them a truepicture of the country context.

• Consider technology as a solution fromestablished world class vendors

• Review and revise enterprise wide KYCpolicies and procedures to better identify,manage and mitigate risk.

• Continue to invest resources incompliance and make the board and thesenior management of aware of lossesdue to non-compliance and de-risking

• Engage with professional data vendorswho can facilitate access to critical and upto date sanctions, PEP and enforcementdata.

13

Fintelekt’s Advanced AML Training is a four-day residential intensive training program designed as an advanced refresher for bankers and financial services professionals across Asia, leading to the FCAP certification.

ANNOUNCEMENT

Fintelekt Certified

AML Professional

Hall of Fame

Fintelekt completed two batches of FCAP training in August 2018 (Mumbai) and October 2018 (Goa).

▪ Anita Atreya (NMB Bank, Nepal)▪ Munni Rajbhandari (Nepal Clearing House,

Nepal)▪ Prajana Kayastha (Nepal Clearing House,

Nepal)▪ Saber Sharif (bKash, Bangladesh)▪ Ahammad Ali (bKash, Bangladesh)▪ Aleya Begum (Janata Bank, Bangladesh)▪ Mohammed Nurul Alam (Janata Bank,

Bangladesh)▪ Morjina Khatun (Janata Bank, Bangladesh)▪ Khaleda Parvin (Janata Bank, Bangladesh)▪ Mohammad Rayhan Sheikh Rashed (Janata

Bank, Bangladesh)▪ Sukamol Chandro Das (Janata Bank,

Bangladesh)▪ Sheikh Taohiduzzaman (Janata Bank,

Bangladesh)

▪ Md. Ziaul Islam (Janata Bank, Bangladesh)▪ Palash Chandra Nath (Janata Bank,

Bangladesh)▪ Md. Tahazzat Hossain (Janata Bank,

Bangladesh)▪ Prakash Gyawali (Janata Bank Nepal,

Nepal)▪ Om Kumari Shrestha (Janata Bank Nepal,

Nepal)▪ Binod Rijal (Nepal Bangladesh Bank,

Nepal)▪ Chetan Bar Singh Thapa (Bank Of

Kathmandu, Nepal)▪ Arun Kanti Paul (Rupali Bank,

Bangladesh)▪ Md. Ismail Hossain Sheikh (Rupali Bank,

Bangladesh)

14

FCAP Batch 5 – August 2018, Mumbai

ANNOUNCEMENT

FCAP Batch 6 – October 2018, Goa

▪ Mohammed Shajahan Chowdhury (Rupali Bank, Bangladesh)

▪ Utpal Kabiraj (Rupali Bank, Bangladesh)▪ Abdullah Al Mahmud (Rupali Bank,

Bangladesh)▪ Md.Abul Hasan (Rupali Bank,

Bangladesh)▪ Salamun Nessa (Rupali Bank,

Bangladesh)▪ Mohammed Kawsar Mustafiz (Rupali

Bank, Bangladesh)▪ Mohammad Moniruzzaman (Rupali Bank,

Bangladesh)▪ Md. Monirul Haque (Rupali Bank,

Bangladesh)

▪ Rajesh Pokharel (Century Bank, Nepal)▪ Vishnu Tiwari (Century Bank, Nepal)▪ Hifzue Rahman (Agrani Bank,

Bangladesh)▪ S A AL Mamun (Agrani Bank,

Bangladesh)▪ Mohammad Saiful Islam (Agrani Bank,

Bangladesh)▪ Rabeya Wazed (Agrani Bank,

Bangladesh)▪ Jakia Khatun (Agrani Bank, Bangladesh)▪ A S M Razzakul Razi (Agrani Bank,

Bangladesh)▪ Mosammat Farhana Islam (Agrani Bank,

Bangladesh)

▪ Pramod Shakya (Nepal Investment Bank, Nepal)

▪ Vivek KC (Nepal Investment Bank, Nepal)▪ Sujwal Bajracharya (Nepal Investment

Bank, Nepal)▪ Umesha Dilakshini Fernando (Pan Asia

Bank, Sri Lanka)▪ Yashanthi Shanika Wijetilleka (Pan Asia

Bank, Sri Lanka)▪ MD Humayun Kabir (Agrani Bank,

Bangladesh)▪ MD Shah Alam (Agrani Bank, Bangladesh)▪ Marvyn Gomez (Agrani Bank,

Bangladesh)▪ Rubel Ahmod (Agrani Bank, Bangladesh)▪ Mohammad Rejaul Sheikh (Agrani Bank,

Bangladesh)

▪ MD Shah Alam (Agrani Bank, Bangladesh)▪ MD Nanu Miah (Agrani Bank,

Bangladesh)▪ MD Shafiul Alam (Agrani Bank,

Bangladesh)▪ MD Abdul Kaium (Agrani Bank,

Bangladesh)▪ Golam Kibreya(Outgoin and photo)

(Agrani Bank, Bangladesh)▪ MANOJ PROSAD (Agrani Bank,

Bangladesh)▪ Md. Shahjahan Ali (Eastern Bank Limited,

Bangladesh)▪ Hisham Uzzaman Choudhury (bKash,

Bangladesh)▪ Md. Noor-E Alam (bKash, Bangladesh)

15

Country Summary:Thailand

Thailand, officially the Kingdom of Thailand andformerly known as Siam, is a unitary state atthe centre of the Southeast Asian Indochinesepeninsula composed of 76 provinces. Thecapital and largest city is Bangkok. Althoughnominally a constitutional monarchy andparliamentary democracy, the most recentcoup in 2014 established a de facto militarydictatorship.

Through the 18th and 19th centuries, Thailandfaced pressure from France and the UnitedKingdom, but it remained the only SoutheastAsian country to avoid direct Western rule.After a revolution in 1932, Siam became aconstitutional monarchy and changed its officialname to "Thailand". Apart from a brief periodof parliamentary democracy in the mid-1970s,Thailand has periodically alternated betweendemocracy and military rule.

In the 21st century, Thailand endured a politicalcrisis that culminated in two coups and theestablishment of its current and 20thconstitution by the military junta, the NationalCouncil for Peace and Order.

Thailand is classified as a newly industrializedeconomy, manufacturing, agriculture, andtourism being the leading sectors of theeconomy .

COUNTRY SUMMARY

Category Value

Population 68.8 million (in

2017)GDP Growth Rate 3.9% (in 2017)

Inflation 0.7% (in 2017)

Currency Thai baht (THB)

Currency exchange rate 1 USD = 32.79

THB*World Bank Ease of

Doing Business Rank

2017

26, out of 190

countries

Transparency

International’s

Corruption Perception

Index rank 2017

96, out of 180

countries

*Source: www.xe.com (On December 12,2018)

16

Banking Industry

There are 14 Thai commercial banks, 2 Thairetail banks, 6 state-owned banks and 11foreign bank branches in Thailand. The bankingindustry regulator is The Bank of Thailand(BOT).

Thailand’s banking regime underwent adeterioration from 2012 to 2016 , when autoloans started going bad followed by unsecuredloans to Small and Medium Enterprises (SME).Thai banks continue to face asset qualitypressure because of these two sectors and arealso exposed to risks in the highly indebtedhousehold sector. The (Non-Performing Loans)NPL ratio is high and rising in the SME sector,reaching 4.5% in Quarter 1 of FY 2017.

The Thai banking system’s performance in 2017has improved in line with economic recovery,along with asset quality. Year 2018 is expectedto be different for the Thai banks. The economyis expanding at the fastest rate since 2012. NPLratio has stabilized at around 3%, and thecountry is expecting to see a GDP growth of 4%in 2018. Thailand is an export-oriented country,with rapid export growth fuelling the economyfurther. Regulatory reforms and policy changesare expected to contribute to business stability.

AML Regime

Thailand is a founding member of theAsia/Pacific Group on Money Laundering (APG)in 1997. Thailand is a centrally locatedSoutheast Asian country and is subject tosignificant money laundering and terroristfinancing threats. The country is known to haveextremely porous borders. This makes thecountry vulnerable to money laundering withinits own economy, as well as to many categoriesof cross-border crime, including illicit narcotics,wildlife trafficking, and other contrabandsmuggling.

In February 2010, FATF identified Thailand as ajurisdiction which has strategic AML/CFTdeficiencies. In June 2013, the country wasremoved from the list of monitoredjurisdictions after it established the legal andregulatory framework to meet its commitmentsin its Action Plan regarding the strategicdeficiencies that the FATF had identified.

COUNTRY SUMMARY

There is strong political support for recentAML/CFT reforms and for ongoingcoordination and cooperation at policy andoperational levels.

Basel AML Index

The Basel AML Index, published by theBasel Institute on Governance, providesrisk ratings based on the quality of acountry’s framework for AML and CFT andrelated factors such as perceived levels ofcorruption, financial sector standards andpublic transparency. Out of 146, a rank of 1denotes the highest risk of moneylaundering and terrorist financing in thecountry, while 146 would be the lowest risk.In 2017, Thailand was ranked 44 on thisindex, and 6th amongst East Asia andPacific countries.

Anti-Money Laundering Office (AMLO)

Anti Money Laundering Office (AMLO) isthe main state authority in Thailand thatsets out AML/CFT policies and measures, aswell as acts as Financial Intelligence Unit(FIU) of Thailand. AMLO receives, analysesand forwards transaction analysis reportsto concerned authorities for ML/FTprosecution. The AMLO was establishedupon the adoption of the Anti-MoneyLaundering Act (AMLA) and is undersupervision of the Prime Minister.

Anti-Money Laundering Act

The first Anti-Money Laundering Act ofThailand was passed in 1999 and wasamended in 2008. This was furtheramended and on October 9, 2015, Anti-Money Laundering Act (AMLA) of B.E. 2542went into effect. In addition to addingoffenses related to human trafficking andonline gambling to the list of predicateoffenses, this act calls for the AMLO toreport directly to the Prime Minister. Thisamendment expanded the scope of moneylaundering offenses, onboarding policy andcustomer due diligence, non-disclosureobligations, extended CDD Record Keepingand coordination with other regulators.

17

NEWS

Asia Regulatory Updates

FATF's new AML regulations targettingcryptocurrencies

The Financial Action Task Force (FATF) adopted changes to its global AML standards to address cryptocurrencies. The changes include recommending that jurisdictions ensure virtual asset service providers are licensed or registered, monitored by the government, and subject to AML regulations including due diligence, reporting, and record keeping; and recommending that jurisdictions assess and understand the risks associated with virtual assets and identify effective systems to conduct risk-based monitoring or supervision of virtual asset service providers.

Israel joins the FATF

Israel has been accepted as a member of the FATF, a global inter-governmental body dedicated to combating money laundering and terrorism financing as its 38th member. The inclusion would allow the Israeli financial sector to function more easily in the international economy.

Philippines adopts National AML/CFT strategy

The Philippines has adopted a national strategy on AML/CFT for 2018-2022. The executive order mandates all relevant

government agencies and instrumentalities to adopt the strategy in the formulation and implementation of all their plans and programs which may have an impact on the AML/CFT efforts of the government. The order also creates a national coordinating committee to facilitate inter-agency coordination for the development of national policies on AML/CFT.

Pakistan PM approves tabling of AML bill in Parliament

Prime Minister Imran Khan has approved submitting the Anti Money Laundering (AML) Bill to Parliament for amendment in a bid to comply with the requirements of the Financial Action Task Force (FATF). The AML Bill would be tabled before Parliament for increasing penalty under the proposed law.

7 Major Exchanges in Korea Agree on Joint Measures

7 major crypto exchanges in South Korea have joined forces to create a sound cryptocurrency ecosystem, agreeing on joint measures such as information sharing and real-time monitoring of abnormal transactions. Meanwhile, the Korean government is working on institutionalizing crypto exchanges.

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