MoneyLaundering Terrorist - Brac Bank

Money Laundering & TerroristFinancing

Risk Management Guidelines

BRAe BANK LIMITEDSeptember 2019

ML & TF Risk Managemen t Guidelines

List of Abbreviations

AML/CFT: Anti Money Laundering/Combating the Financing of Terro rism

AMLD : Anti Money Laundering Divisio nAPG: Asia Pacific Group on MoneyLaunderingATA: Anti-Terrorism ActBAMLCO: Branch Anti Money Laundering Compliance OfficerBB : Bangladesh BankBBL: BRAC Bank LimitedBDT : Bangladesh TakaBFIU : Bangladesh Financial Intelligence UnitCAMLCO : Chief Anti Money Laundering Compliance OfficerCCC : Central Compliance CommitteeCDD : Customer Due DiligenceEDO: Enhanced Due DiligenceCFT- Combating Financing of TerrorismCTC : Counter Terrorism CommitteeCTR : Cash Transaction ReportFATF : Finan cial Actions Task ForceFI : Fina ncial InstitutionFlU : Financial Intelligence Un itFSRB : FATF Style Regiona l BodyGPML: Global program against Money Laundering ICRG:Intern ational Cooperation an d Review GroupIOSCO : International Orga nizatio n of Securities Commissions IAIS :Intern ational Association of Insurance SupervisorsKYC : Know Your CustomerML: Money LaunderingMLPA : Money Laundering Prevention ActNCC : National Coordination Commi tteeNCCT : Non-cooperating Countries and Territori esOECD : Organization for Economic Co-opera tio n andDevelopment OFAC: Office of For eign Assets ControlPEP : Politically Exposed Perso nsPWMDF : Proliferation of Weapons of Mass Destruction FinancingSAR: Suspicious Activity ReportSTR : Suspicious TransactionRepo rt TF: Terrorist FinancingTP : Transaction ProfileUN : United NationsUNODC : UN Office of Drugs and CrimeUNSCR : United Nations Security Council Resolution

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CONTENTS

M L & TF Risk Management Guidelines

SI. Chapte r Page no.

EXECUTIVE SUMMARY 7

1 AN OVERVIEW OF MONEY LAUNDERI NG 8 -1 5AND T ERR ORIST FINANCING

1.1 Introduction 81.2 General Provision 81.3 Purpose 91.4 Benefits of this Policy Man ual 91.5 Definin z money launderinz 91.6 Stazes of money launderin z 10-111.7 VVhv monevlaunderinl! is done 121.8 Defining terrorist finan cing 12-131.9 The link between money lau nderi ng and 13-14

terror ist fina ncing

1.10 VV hv we must combat ML& TF 14-151.11 Targeted fina ncial sanctions 152 VARIOUS TYP ES/ TECHNIQUES OF 1 6- 23

MONEY LAUNDERING ANDTERRO RIST FINANCING

2.1 Trade-Based Money Laundering & terr orist 16financing (TBML& TF):

2.1.1 Vulnerab ilities oflnternational Trade 16-17

2.1.2 Basic Techn iques ofTBML/TF 17-192.1.3 Assessme nt of Trade Finance Risks 192.1.4 Applicati on of Controls 192.1.5 Key Controls of Letter of Credit (LCs) & Bills 19-20

for Collection (BCs)

2.1.6 COD for Establishme nt of LC 202.1.7 EDD for Establishm ent ofLC at Hizh er Risk Scena rio 20-212.1.8 Best Practices to Combat TBML& TF 21-222.1.9 Red Flags of Trade Based Monev Laun dering 22-232.2 Use of Alternative Remittance System: 233 INTERNATIONA L INITli\T IVES ON ML/TF 24-2 63.1 , Introduction 24 .

3.2 The United Nati ons 24-253.3 The Financial Action Tas k Force 25-263.4 Asia Pacific Group on Money Laundering [APG) 263.5 The Egmon t gro up of fina ncial int eHigen ce units 263.6 The Basel committee on ba nki nz supervi sion 264 NATIONAL INITIATI VES ON ML/TF 27-284.1 Introduction 274.2 Founding member of APG 274.3 Legal framework 274.4 Other various dep artment and Committee 274.5 Risk bas ed approach 285 AML & CFT COMP LIANCE PROGRAM 29-31

5.1 Introduction 29

BRAC Bank Ltd

ML & TF Risk Management Guidelines

5.2 Component of AML & CFT compliance program 295.3 Compliance Program Development OfBRACBank 295.4 Communication of Compliance Program 305.5 Senior management role 30-31

6 COMPL IANCE STRUC TURE OF A BANK 3 2 -3 66.1 Introduction 326.2 Central Como liance Committee 32-3 36.3 Chief anti money laun dering compliance 33-34

officer (CAMLCO)6.4 Appointment of CAMLCO & Formati on of CCC 34

for Custodial Servic e6.5 Branch anti money launderin g compliance 34-35

officer (BAMLCO)6.6 AML& NBR Affairs: 356.7 Internal control and complianc e 3S-366.8 Extern al auditor 367&8 AML & CFT P OLlClES AND 37-60

PROCEDURES of BM C BANK LIMIT ED

7 .0 PO LICY 37-40

7.1 Written AML & CFT Compliance Policy 377.2 Customer Acceptance Policv 37-397.3 Overs ight Policy On bkash 40

8 P ROCEDURES 4 1-608.1 Customer Due Diligence & KYC Proc edures 418.2 How to Perform COD 418.3 Timing Of COD 41 -428.4 Customer Identity: 42-448.5 Verification of Addre ss 448.6 Verification of Source of 44 -45

~"n n8.7 Introducer 458.8 Nominee 458.9 " Corporate Bodies and Other Entities 45-488.10 Partnerships and Unincorporate d Businesses 488.11 Intern et or Online Based Customer 48

8.12 Correspondent Banking 48-498.13 Pr ovision of Safe Custodv and Safety Deposit Boxes 498.14 Walk-In / One off Customers /On-line transactio ns 49-508.15 Non Face-to-Face Custo mers 508.16 CODfor Beneficial Owners 508.17 Verification of Ultimate Beneficial Ownership (UBO) 50-52

8.18 Exception When Onenlnz a Bank Account 528.19 In Case Where Conducting the COD Measure is not 5 2

Possible8.20 Reliance On Thir d Party 528.21 Management of Legacy Accounts 538.22 Customer Unique Iden tification Code 53

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ML& TFRisk Management Guidelines

8.23 Politically Exposed Persons (PEPs), Influential 54-58Persons and Chief Executives or Top Level Officials 0

any International Organizations8.24 KYC Proc edure 588.25 KYCProfiling 588.26 Risk Categorization - Based on Activity / KYC Profile 58-598.27 Review and Upda te 59-609 T RANSACTIO N MONIT ORING PROCESS 61-679.2 Transaction Profile 61-629.3 On-going transaction monitoring by Branches 63-679.4 Monitoring of Str uctu rin g 6710 REP ORTI NG TO BFIU 68-7510.2 Susp icious Transa ction Reporting Procedures 68-7110.3 Cash Transaction Report 71-7310.4 Self-Assessme nt Report 73-7410.5 Other Return Submissio n: 7511 RECRUIT MENT, TRAININ G AND AWARENESS 7 6·7811.1 Employee Screening 7611.2 Know Your Employee [KYE] 7611.3 Education And Training Programs: 76-7711.4 Senio r Management/Operati ons Supervisors: 7811.5 Customer Awareness 7811.6 Awareness Of Mass People 7811.7 Refresher Training: 7811.8 Job Specific Training: 7812 RE CORD KEEPING 79-8 0

12.2 Legal Obligations 7912.3 . Record s To Be Kept 7912.4 Customer Information 7912.5 Transactions eO12.6 Internal And External Reports 8012.7 Other Measures 8012.8 Formats And Retrieval Of Records 8013 T ERRORIST FINANCING & 81-90

P IHH 11'1011.~.~" IO HJh.l\Jrll\lr.

13.1 Introduction 8113.2 Legal Obligati ons & BFIUCircul ar 8113.3 Necess itv Of Funds BvTerrorist 8113.4 Sources Of Terrorist Financi ng: 8213.5 Movement Of Terrorist Fund 82-8313.6 Proliferation Financing: 83-8713.7 Targeted Financial Sanctions 87-8813.8 SANCTION Screening Mechan ism At BRAC Bank 88-8913.9 Role Of Banks In Pr eventing TF & PF 89-9010 CONCLUSIO N 9 0


ANNEXURE

ML & TF RiskManagement Guidelines

Sl. Chapter

Annexure A ML & TF Risk Assessment Guideline

Annexure B KYC DOCUMENTATION RED FLAGS POINTING TO MLJTF

Annexure C RED FLAGS POINTING TO MONEY LAUNDERING

Annexure D BRAC Bank Oversight Policy on bKash

Annexure E SANCTIONScre ening Mechanism of BRAC Bank

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· ML & TF Risk Management Guidelines

EXECUTIVESUMMARY

In recent years, and especially since the events of September 11, 2001, worldwide efforts tocombat money laundering and the financing of te rro rism have assumed heightened importance.Money launderi ng and the financing of terrorism are global prob lems that not only threatensecurity, but also compromise the stability, transparency, and efficiency of financial systems,thus undermining economic prosperity. Such global threats of financing te rrorism have ledfinancial secto r regulators and financial institutions to stre ngthen their vigilance in support ofthe efforts of governments to more easily detect attempts to finance terrorism and to minimizethe possibility that thei r jurisdictions or institu tions become involved.

BRAC Bank always acknowledge and support the increasing need for a partnership betweengovernment, regulators, law enforcement authorities, banks and the general public, bothdomestically and internationally, to 'work together to prevent the laundering of the proceeds ofcriminal activity and terrorism financing. The Board of Directors of BRAC Bank Ltd hasconsidered the fight against financing of terrorism as a team effort and has drawn a policy whichwill assess the adequacy of the internal contro ls and procedures to counter terrorist financing.In addition to that, our Board of Directors and Senior Management are stro ngly committed tosustain high standards of identification and Customer Due Diligence (CDD) information acrossour entire customer base. BRAC Bank management also believe that on-going monitoring oftransactions, training the employees, assisting the law enforcement authorities are as importantas strong KYC controls. Accordingly, the hank has invested heavily - and is committed tocontinuing to do so - in transaction monitoring systems and operatio nal processes to win thebattle against money laundering and terrorist financing.

This is basically a new policy manu al combining of the AML, CFT & KYC/ CAP policy. This policymanual is adopted to fulfill the requirements laid down by BFlU Circular No. 19 datedSeptember 17, 2017. In case of any ambiguity developed due to English version of the BBCircular, original Bangia test is to be considered. CAMLCOis the custo dian of this policy manualand preserves the right to explain and clarify any ambiguity that arises from this policy manual.



AN OVERVIEW OF MONEY LAUNDERING AND TERRORIST FINANCING

1.1 INTRODUCTION

For most countries, money laundering and terrorist financing raise significant issues withregard to prevention, detection and prosec ution. Sophisticated techniques used to laundermoney and finance terrorism add to the complexity of these issues. Bangladesh is no exceptio nto th is. BRAC Bank is committed to the highest standards of anti-money launderin g (AML)compliance and requires management and employees to adhe re to these standards to preve ntuse of our products and services for money laundering purposes. In recognition of the fact thatfinancial institutions are particularly vuln erable to being used by money launderers, BRACBankLtd has bee n at the forefront in the battle for prevention of money laundering and combatingfinancing of terrorism (CFT). The Board of Directors of the Bank views Money Launderin gPrevention as a part of Risk Management stra tegy and not simply as a stand-alone requirementth at is being imposed by legislation. Money Laundering Prevention and Combating Financin g ofTerr orism are viewed as an integral pa rt of the Bank's business systems and needs .

This guidelineis prepare d based on1. Money Laundering & Terrorist Financing Risk Management Guidelines 2015 issued by

Bangladesh Bank2. Money Laundering and Terr orist Financing Risk Assessment Guideline of BRAC BankLtd.3. All relevant laws, circulars and guidelines issued by Central Bank of Banglades h4. Intern ational best practi ces5. BFIU-CIRCULAR-19,20176. Money Laundering Rule prevention rules, 2019

1.2 GENERAL PROVISION:This compliance manua l will be effective upon reviewed by the CCC, MANCOM andsubsequent approval from the Board of Directors. Accordingly, change of policy is to beapproved by th e Board of BRAC Bank Limited. However, MD's approval suffices the changesof policy as recommend ed by CAMLCO, which to be ratified by Board of BBLduring the nextreview of the policy manual.

All employees of the BRAC Bank Ltd need to comply with this manual and all relevantemployees must be thor oughly familiar with and make use of the material contained in th ismanual. Sufficient copies of this manual will be distributed to all subsidiary companies ofthe Bank so that it will be rea dily available to all relevant employees.

CAMLCD is the authority to explain sense and sentime nt of the policy. In case of anyambiguity developed due to English version of the BB Circular, original BangIa test is tobe considered.

This document shall be kept updat ed by the AMLD of the bank under the supervision of theCAMLCO.

This document shall also be reviewed as and when required, while the time period betweensuccess ive reviews shall not excee d three years.



1.3 PURPOSE:

The purpose of this guideline is to:

• Interpret the requirements of the relevant laws and regulations, and how these may beimplemented in practice

• Enable bank in implementing an AML& CFTprogram appropriate to its business havingregard to the business size,nature and complexity;and

• design and implement the systems and controls necessary to mitigate the risks of the bankbeing used in connection with money laundering and the financing of terrorism

1.4 BENEFITS OFTHIS POLICY MANUAL

This guideline is helpful to all concerns with respect toEnab le us to increase awareness of anti-money laundering & combating financing ofterrorismExplain our r esponsibilities under Money Launderi ng Prevention Act 201 2(amended in2015) and Anti-Terrorism Act 2009 (amended in 2012 & 2013).Help us to meet the regulatory requirements and intern ational sta ndards.Understand the consequences ofnon-complia nce.Addr ess the queries regarding the AML/ KYC/CDD procedures of the Bank.Operate various AMLrelate d monitoring & reporting procedur es.

1.5 DEFINiNG MONEY LAUNDERING

Money Launderin g can be defined in a number of ways. However, the fundamental conceptof money launderin g is the process by which proceeds of a criminal activity is disguised toconceal their illicit origins. Howe ver, it can be defined in a number of ways. The FinancialAction Task Force (FATF), the international standard sette r for anti-money laundering(AML) and combating financing of terrorism (CFT) efforts , r ecommends that moneylaun dering should be criminalized in line with the Vienn a Convention and PalermoConvention. Like other cnuntries of the world, Bangladesh has criminalized moneylau ndering in line with those conventions. Moreover, Bangladesh also considers somedomestic concerns like 'smuggling of money or property from Bangladesh' in criminalizingmoney laundering. .Section 2 (v) of Money Launde ring Preventio n Act (MLPA), 2012 of Bangladesh definesmoney laundering as follows :

'Money laun dering' means -i. knowingly moving, converting, or transferring proceeds of crime or property involved in anoffence for the following purposes: -(1) concea ling or disguising the illicit natu re, source, location, owne rship or control of theproceeds of crime; or(2) assisting any person involved in the commission of the predicate offence to evade the legalconsequences of such offence;Ii. smuggling money or property earne d through legal or illegal means to a foreigncountry;iii. knowin gly tra nsferri ng or remitting the proceeds of crime to a foreign country or remittingor bringing them into Bangladesh from a foreign country with the intention of hiding ordisguising its illegal sour ce; oriv. concluding or attempting to conclude financial transactions in such a mann er so tha t thereporting requirement under th is Act may also be avoided;


ML& TF Risk Management Guidelines

v. converting. moving or transferring property with the intention to instigate or assist incommitting a predicate offence;vi. acquiring. possessing or using any property, knowing that such property is the proceeds of apredicate offence;vii. performing such activities so as to the illegal source of the proceeds of crime may beconcealed or disguised; .viii. Participating in, associating with, conspiring. atte mpting. abetti ng. instigati ng or counsellingto commit any offences mentioned above.

Money laundering is a criminal offence under section 4(1) of MLPA, 2012 and penalties formoney laundering are-1. Any person who commits or abets or conspires to commit the offence of money laund ering.shall be punished with imprison ment for a term of at least 4(four) years but not exceeding 12(twelve) years and, in addition to that, a fine equivalent to the twice of the value of the pro pertyinvolved in the offence or taka 10 (ten) lac, whichev er is greater.2. In addition to any fine or punishment, the court may pass an orde r to forfeit the property ofthe convicted person in favor of the State which directiy or indirectly involved in or related withmoney laundering or any predicate offence.3. Any entity which commits an offence under this section shall be punished with a fine of notless than twice the value of the property or taka 20 (twenty) lac, whichever is greater and inaddition to this, the registration of the said entity shall be liable to be cancelled.

1.6 STAGES OF MONEY LAUNDERING

Money laundering process begins after the predicate offences are committed and funds havebeen generated. The main objective of the money launder er is to transform 'dirty' money intoseemingly clean mon ey or other assets in a way to leave as little trace as possible of thetransformation. Traditionally, it has been accepted that the money laund ering processcomprises three stages:

(l)Placeme nt-

At this stage, illegal funds or assets are first bro ught into the financial system. This 'placement'makes the funds more liquid. For example, if cash is converted into a bank deposit, it becomeseasier to transfer and manipu late.

(2)Layering-

Separating the proceeds of criminal activity from their sourc e through the use of layers offinancial transactions (multiple transfers of funds among financial institutions, early surrenderof an annuity witho ut regard to penalties, cash collatera lized loans, Lies with falseinvoicesfbills of lading. etc.) to disguise the origin of the funds, disrupt any audit trail , andprovide anonymity. Launderers want to move funds around, changing both the form of thefunds and their location in order to make it harder for law enforcement authorities to identify"dirty" money. At this stage, money launderers use multip le banks and accounts, act asintermediaries and transact thro ugh corporations and trusts.

(3)lntegration-

Once the funds are layered and distanced from their on gms, they are made available tocriminals to use and contro l as apparently legitimate funds which is called 'integration'. Thelaundered funds are


ML & TFRisk Management Guidelines

Made ava ilable for activities such as investment in legitimate or illegitimate businesses, or spent topromote th e criminal 's lifestyle.

How th e 3 Stages a r e ach ieved ....

Three common factors (3 C's) identified in laundering operations are; the need to;!';!; Conceal (conceal the origin and true ownership)~ Control (maintain control of the proceeds)l;!; Change (cha nge the form of the proceeds)

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1.7 WHY MONEY LAUNDERlNG ISDONE!::J: First, money represents the lifeblood of the organization/pe rson that engages in criminal

conduct for financial gain because it covers operating expenses and pays for anextravagant lifestyle. To spend money in these ways, crim ina ls must make the money

they derived illegally app ear legitimate.!::J: Second, the trail of money from an offense to criminals can be come incriminating

evidence. Crim inals must obscure or hide the so urce of thei r wealth or alternativelydisguise owners hip or control to ensu re that illicit proceeds are not used to prosecutethem.

!=Z Third, the proceeds of crime often become the target of investigation and seizure. Toshield ill-gotten gains from susp icion and pr otect them from seizure , criminals mustconceal their existence or, alternatively, make them looklegitimate.

1.8 DEFINING TERRORIST FINANCING

Terrorist financing can simply be defined as financial support, in any form, of terrorism or ofthose who encourage, plan, or engage in terrorism. The Intern ational Convention for theSuppression of the Financing of Terrorism (1999) under The United Nations defines TF asfollows:1. If any person commits an offense by any means, directly or indirectly, unlawfully andwillingly, provides or collects funds with the intentio n that they should be used or in theknowledge that they are to be used, in full or in part, in order to carry out:a. An act which consti tutes an offence within the scope of and as defined in one of the tr eatieslisted in the link given below 1; orb. Any other act intended to cause death or se rious bodily injury to a civilian, or to any otherperso n not taking any active part in the hostilities in a situation of armed conflict, when thepurpose of such act, by its nature or context, is to intim idate a population, or to compel agovernment or an international organization to do or to abstain from doing an act2. For an act to consti tute an offense set forth in the prece ding paragraph 1, it shall not benecessary that the funds were actually used to carry out an offense r eferred to in said paragr aph1, subparagraph (a) or (b).Ban gladesh has ratified this conventi on and criminalized terrorism or terrorist activities undersection 6(1) of Anti-Terrorism Act, 2009 in line with the requirement set out in 9 (nine)conventions and protocols that were annexed in the convention.Section 7(1) of Anti-Terro rism Act (ATA), 2009, defines terrorist financing as follows- If anyperson or entity willfully pr ovides, receives, collects or mak es arrangements for money, serviceor any other property, whether from legitimate or illegitimate source, by any mea ns, directly orindirectly, with the intention that, it would, in full or in part, be used-a) to carry out terrorist activity;

b) by a terrorist person or entity for any purpose, or is in the knowledge that it may be used bya terrorist person or entity; th e said person or entity sha ll be deemed to have committ ed theoffence of terrorist financing,



More over, according to Anti-Terrorism Act (ATA), 2009 conviction for terrorist financing shallnot depend on any requirement that the fund, servi ce or any oth er property was actually used tocarry out or direct or attempt to carry out a terrorist act or be linked to a specific terrorist act.The penalties for the offences for money laundering are-(1) In case of a TF offence made by a person, he/she shall be punished with rigorousimp risonment for a term not exceeding 20 [twe nty) years but not less than 4 [four) years, and in

addition to that, a fine equivalent to twice the value of the property involved with the offence ortaka 10 [ten) lac, whichever is greater, may be imposed.(2) In case of a TF offence made by an entity, the Government may list the entity in the Scheduleor proscribe and list the entity in the Schedule, by notification in the official Gazette and inaddition to that, a fine equivalent to thrice the value of the property involved with the offence orof taka 50 [fifty) lac, whichever is greater, may be imposed. Moreover, the head of tha t entity,whether he is designated as Chairman, Managing Director, Chief Executive or by whatever namecalled, shall be punished with rigorous imprisonment for a term not exceeding 20 [twenty)years but not less than 4 [four) years and, in add ition to that, a fine equivalent to twice the valueof the property involved with the offence or of taka 20 [twenty) lac, whichever is greate r, maybe imposed unless he/ she is able to prove that the said offence was committed without hisknowledge or he had tried his best to prevent the commission of the said offence.

1.9 THE LINK BETWEEN MONEYLAUNDERJNG AND TERRORIST FINANCING

The techniques used to launder money are essentia lly the same as those used to conceal thesources of and uses for terrorist financing. But funds used to support terrorism may originatefrom legitim ate sources, criminal activities or both. Nonetheless, disguising the source ofterro rist financin g, regardless of whether the sou rce is of legitim ate or illicit origin, is important.If the source can be concealed, it remains ava ilable for futu re terrorist financing activities .Similarly, it is important for terr orists ' to conceal the use of the funds so that the financingactivity goes undetected.As noted above, a significant difference between money laundering and terrorist financing isthat the funds involved may originate from legitimate sources as we ll as criminal activities. Suchlegitimate sources may include donations or gifts of cash or othe r assets of organizations, suchas foundations or charities that, in turn, are utili zed to support terrorist activities or terroristorganizations.

. Difference between Money Laundering and Terrorist Financing

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1.10 WHY BRAe BANK MUST COMBAT ML & TF

Money launderi ng has potentially devastati ng economic, security, and social consequences.Money laundering is a vital process to make crime worthwhile, It provides the fuel for drugdeaiers , smugglers, terro rists, illegal arms dealers, corrupted public officials, and others tooperate and expand their criminal enterprises. This drives up the cost of governments due tothe need for increased law enforcement and health care expenditures (for example, fortreatment of drug addicts) to combat the serious consequences result ed from ML & TF,

Money laundering diminishes government tax reve nue and therefore indirectly harms honesttaxpayers , It also makes govern ment tax collection activities more difficult This loss of revenuegenerally means higher tax rates than would normally be the case if the untaxed proceeds ofcrime were legitimate. We also pay more taxes for public work expenditures inflated bycorruption. And those of us, who pay taxes, pay mor e because of those who evade taxes. So weall experience higher costs of living than we would if financial crimes including moneylaundering we re prevented.Money laundering disto rts assets and commodity prices and leads to misallocation of resour ces,For financial institu tions it can lead to an unstable liability base and to unsound asset structuresthereby creating risks of monetary instability and even systemic crisis. The loss of credibilityand investor's confidence, that such crisis can bring, has the potential of destabilizing financialsystems, parti cularly 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 activitieswith legitimate funds, to hide the ill-gotte n gains. These front companies have access tosubstantial illicit funds, allowing them to subsidize front company products and services atlevels well below market rates. This makes it difficult, if not impossible, for legitimate businessto compete against front companies with subsidized funding, a situation that can result in thecrowding out of private sector business by criminal organizations.



Among its other negative socioeconomic effects. money laundering transfers eco nomic powerfro m the market, government, and citizens to criminals. Furthermore, the shee r magnitude ofthe economic power that accrues to criminals from money laundering has a corr upting effect onall elements of society.

The social and politic al costs of laun der ed mon ey are also serious as laundered money may be

used to corr upt national instituti ons. Bribing government officials underm ines the moral fabricin society! and. by weakening collective ethical standards, corrupts our democratic institutions.When money laundering goes unchecked, it encourages the underlying crim inal activity fromwhich such money is generated.

Therefore, it is the responsibly of all BRAC Bank staff to be pr oactive and fight agains t moneylaundering and terrorist financing.

1.11 TARGETED FINANCIAL SANCTIONS

The term Targeted Financial Sanctio ns (TFS) means both asset freezing and prohibition toprevent funds on othe r asset s from being made availab le, direc tly or indirectly, for the be nefit ofdesignated persons and entities. This TFS is a smart solution to combat terrorism, terroristfinancing and proliferation finan cing of weapons of mass destruction (WMD) by state actors orno n-sta te actors from the UN Security Council. In contrast with the economic sanction on ajurisdiction, TFS is imposed on only suspected person or entities while innocent person orentities remain safe.

TFS r elat ed to terrorism an d terrorist financing-FATF recommendation 6 requires 'Countries should implement targeted financial sanctionsregimes to comply with United Nations Security Council resolutions relating to the pre ventionand sup pression of terrorism and terrorist financing. The resolutions require countries to freezewith out delay the funds or other assets of, and to ensure that no funds or other assets are madeavailable, directly or indirectly, to or for the ben efit of, any perso n or entity either (i) designat edby, or under the authority of, the United Nations Security Council und er Chapte r VII of theCharter of the United Nations, including in accordance with resolution 1267 (1999) and itssuccessor resoluti ons ; or (ii) designated by that country pursu ant to r esoluti on 13 73 (2001)'.

TFS r ela t ed to Proliferation -FATF reco mmendation 7 requires 'Countries should implement targeted financial sanctions tocomply with United Nations Security Council resolutio ns relating to thepre venti on , sup pressionand disruption of proliferation of weapons of mass destruction and its financing.

These resolutions require countries to freeze without de lay the funds or othe r assets of, and toens ure that no fund s and othe r assets are made available, directly or indirectly, to or for thebenefit of, any person or entity designated by, or und er the autho rity of, the United NationsSecurity Council und er Chapte r VII of the Charter of The United Nations' .



VARIOUS TYPES/TECHNIQUES OF MONEY LAUNDERING ANDTERRORIST FINANCING

2.1 TRADE-BASED MONEY LAUNDERING & TERRORlST F1NANClNG (TBML & TF):

The term "Trade-based Money Laundering and Financial Terrorism" refers to th e process ofdisguising the proceeds of crime and moving its value through the use of trade transactions inan att empt to legitimize their illegal origins or finance by thei r activities.

Misuse of Internat ional trade system is one of the main methods by the criminals to inte gratetheir proc eeds into the formal economy. As evidence emerges that Int ernational trade isbecoming a hub of heaven of dirty money.

Traditional Money Laundering are being done in Cash, Cheque, TC, Bond, Stock, Gold, PreciousMetal,Wire transfer, Insur ance policy, Casino Chips, Luxury Gods,Antiques, Art etc. But with thechange of rapid global financial system, Money Launde ring & Terrorist Financing activitiesevolve and transform quickly and which present new threats to our Banking system like TradeBased Money Laundering, Technology based Money Laundering and Proliferation Financing. So,Bank officials shal l be aware of such techniques of Money Laundering & Terrorist Financing andkeep them updated properly.

2.1.1 VULNERABIL lT1ES OF lNTERNATlONAL TRADE

The vulnerabilities of the int ernational trade system are associated with :

• The enormous volume of trade flows, which obscure individual transactions and provideabundant opportunities for criminals/criminal organizations to transfer value acrossborders;

• The volume of trade not only has the potential to hide individual transactions, but makesoversight and enforcement difficult Official regulation and monitoring of trade flowsinvolve a range of agencies in Bangladesh and in overseas which add to the complexityof detecting TBML.

• The movement of goods through multiple transshipment points and third parties addscomplexity to the money tra il and enables criminals to distance themselves from theactivity. Variable standards and controls in other jurisdictions can also ass ist criminalsto embed TBML into a complicated chain of tra de payments and shipments.

• The complexity associated with (often multiple) foreign exchange tr ansactions andrecourse to diverse financing arrangeme nts;

• The additional complexity that can ari se from the practice of commingling illicit fundswith the cash flows oflegitimate business;

• The limited resource of verification procedures or programs to e:<change customs databetween countries;



• Most customs agencies have limited resources to detect illegal trade transactions;• Generally, customs authority in Bangladesh inspects approximately 5 percent of all

cargo shipments entering or leaving the country;• Customs authority is more focused to collect customs duty than identifying suspicious

trad e transactions.

In this connection, all AD Branches & concerned Divisions of Head Office ar e advised toensure Enhanced Due Diligence (EDD) and pre cautions in this matter '- like variousSanctions, Red-flags, Trade data Tariff Schedule etc.

2.1 .2 BASICTECHNIQUES OFTBMLjTF

The basic techniques of trade-based Money Laundering that we found in Bangladesh are:

a) Price misrep resentation (Over-invoicing and Under-invoicing of goods andservices);b) Multiple-invoicing of goods and services;c) Over-shipments and Under-shipments of goods and services;d) Falsely described goods and services.e) Cross Border Trade (through land port)f} Legitimate shipment of goods to tra nsfer value between criminal groups.g) Disguising laundered funds as intern ational consultancy service fees.h) Phantom or ghost shipments where the relevant paperwork is lodged with

authorities, although the goods are not shipped.

A) Over-invoicing and Under-invoicing of goods and services :

Money Laundering through over-invoicing and under-invoicing of goods and services, which isone of the oldest methods of fraudulently transferrin g value across borders, still remains acommon practice in Bangladesh today. The key element of this technique is themisrepresentation of the price of the goods or services in order to tra nsfer additional valuebetwe en the importer and exporter.

i. Under-Invoicing in Export: By invoicing the good or service at a price below from the"fair market" price, the exporter is able to transfer to the importer, as the payment forthe goods or services will be lower than the value that the importer receives when it issold in the open market

ii. Under-Invoicing in Import: By the under invoicing of imported item the importer canevade the import duty and taxes. Foreign organization or its agents can use theimporting country as dumping station. Multinational companies can use under invoicedimport to create a monopoly market.

iii. Over-Invoicing in Export: By invoicing the good or service at a price above the fairmarket price, the exporter is able to receive value from the importer, as the payment forthe goods and service is higher than the value that the importer will receive when it issold in the open market The exporter may also issue overprice d invoice to get somefacilities that are provided by the Government like Cash Incentives, Subsidies etc. or toget CIP (Commercially Important Person) status or ExportTrophy.



iv. Over-Invoicing in Import: By over invoicing of impo rted item the importer can transferfund to the importing country. It happens generally in non-traditional items or lowtaxed items. Besides this, motive of the importer is exercised through over invoicedimported items to transfer pricing, or to exploit local investors or to get the curb marketpremium.

B) Multiple-invoicing of good s and se rvices:

Another technique is used to launder funds involves issuing more than one invoice for the sameinternational trade transaction. By invoicing the same goo ds or se rvices more than once, amoney launder er or terror ist financer is able to justi fy multiple payments for the same shipmentof goods or delivery of services. Employing a number of different financial institutions to makethese additional payments can furth er increas e the level of complexity surro unding suchtransactio ns. Generally, this type of technique is rar ely used in Bangladesh.

C) Over-shipments and Under-shipmen ts of goods and services:

In addition to manipulating export and import prices, a money launderer can also overstate orunderstat e the quantity of goods being shipped or services being provided. In the extreme, anexporter may not ship any goods at all, but simply collude with an importer to ensure that allshipping and customs documents associated with this so called "phanto m shipment" areroutinely processed. Banks and other financial institutions may unknowingly be involved in theprovision of tra de financing or the se phantom shipments.

Dj Deliberat e obfuscation of the type ofgood s:

Parties may structure a transaction in a w ay to avoid altering any suspid on to Fls or to otherthird parties which become involved. This may simply involve omitting information from therelevant documentation or deliberate ly disguising or falsifying it. This activity may or may notinvolve a degree of collusion between the parties involved and may be for a variety of reasons orpurposes.

E) Falsely Described Goods and Services:

Besides, manipulating the export or import prices, a money launde rer can misrepresent thequality or types of a goods or services. For example, an exporter may ship relatively inexpensivegoods and falsely invoice it as a mor e expensive it em or an entirely different item. This creates adiscrepancy between what appears on the shipping and customs documents and what isactually shipped. This type of false descriptions can also be used in the trade in services, such asfinancial advice, consulting services and market research. In practice, the fair market value ofthese servi ces can present additional valuation difficulties.

Page 18 of 123BRAe Bank Ltd

F) Phantom Shipping/Ghost Shipping:

Aphantom shipping also known as a ghos t shipping, is a shipping with no living crew aboard; itmay be a ghost ly vessel in folklore or fi ction, such as the Flying Dutchman, or a real derelictfound adrift

ML& TFRiskManagement Guidelines

with its crew missing or dea d unde r unknown circum stances. The te rm is sometimes used forships that have been decomm issioned but not yet scrapped.

g) Cro ss Border Trade (Through Land Po rt):

Bangladesh is surrounded by Ind ia on all sides except for a small bo rder with Myanmar to thefar southeas t and by the Bay of Bengal to the south. There has bee n a substantial informalunr ecorded trade across the India-Bangladesh land borders (2,429 miles). Much of this trade isquasi-legal and is best chara cterize d as "informal" and the trade generally bypass Customsposts. India-Bangladesh informal trade is essentially one-way, from India to Baogladesh,leavin g aside gold, silver and currency which is smuggled into India in part to pay for Indiangoods.

2.1.3 ASSESSMENT OF TRADE FINANCE RISKS

As with the other lines of business, se rvices and products, Bank shall apply a risk basedapproach to the assessment and management of risk in relatio n to trade finance. In thisconnection, BRAC Bank Ltd has developed general guidance on a Risk Based Approach namedas "ML & TF Risk Assessment Guidelines (Annexure A)" which is conside red relevant in thecontext of trade finance.

2.1.4 APPLICATION OFCONTROLS

Bank shall review trade transacti ons on an individual basis. Generally, transactio ns areexamine d for the applica tion of the.lCC rules re ferred to above and for the workability in termsof whether the conditions as documented conform with international sta ndard banking practiceas well as what is known of the customer. This review is used to 'examine the transaction notonly for fraud but also for unusual and potenti ally suspicious activities. The complex paperbased natu re of these transactions provides a large amou nt of information about the parties,goods and services being transferred and involves scrutiny of relevant documents. Whilstcertain elements of this process may be auto mated (e.g. screening of transactions againstpubli sh ed lists of sanctioned entities) the overa ll process of reviewing trade documents by itsnature cannot be successfully automated.

Such contro ls are relevant in the context of anti-money laundering and counter-terroristfinancing efforts . The most effective means to identify terrorist involvement in trade financetransac tions are for competent authorities to identify those indivi duals and organizationsconnected to terrorist activities and pr ovide that information to Bank in a timely manner.Accordi ngly, trade finance controls screening part of the transactional information againstlists of known or suspected te rrorists issued by compe ten t authorities having jurisdictionover the relevant FI are relevant in the context of anti-te rrorist financing efforts.

2.1.5 KEY CONTROLS OF LETTER OF CREDIT (LCS) & BILLS FOR COLLECTION(BeS)

Due Diligence: Identifying and knowing the customer as well as exercise ris k based checks inrelation to parties who may not be customers. Given the range of meanings applied refer encewill be made as necessary to "app ropri ate due diligence" (which may consist of ris k basedchecks only).



Reviewing: Bank shall be defined as any process (often not automated) to review relevantinformation in a transaction relating to the relevant parties involved, documentation presentedand instructions received. As will also be described under the Risk Indicat ors section, certaininformatio n can and should be reviewed and checked before transactio ns are allowed toproceed.

Screening: Bank shall introduce an automate d process to compare information againstreference sources such as terrorist lists. Screening is normally undertaken at the same timeas reviewing and prior to the completion of the spe cific activity subject to review. It may alsobe undertaken at the same time as, or as part of, due diligence.

Monitoring: Any activity to review completed or in progress transaction s for th e presence ofunusual and potentially susp icious features. For tra de transactio ns, it should be recognized thatit is impossible to introduce any standard pattern ing techniques in relation to account/transactional monitoring processes or systems. This is due to the range of variations which arepresent even in normal trading patterns .

2.1.6 CDD FOR ESTABLISHMENT OF LC

o Apply Risk Based Approach to the assessme nt and management of risk.o Ensure sanction screening (UN, OFAC, HMTreasury, EU,and Local List) before creation

of MT700/MTl03.o Sanction Advice duly accepted by the client.o Documentation / Mortgage formalities completed.o Up to date Certificates /Licenses/

Policies complying the latest AuditObservations. Clean CIB Report

o Factory Complianceo Credit Ratings• Environme ntal Risk ratingso NOCon overdue Bill of Entry from previous

Bank

o NOCon rece iving down payment for defaultclient BB Bills liability to be adjusted withi n6 months

• General Indemnity of the cliento Availing singly party exposure

This is not an exhaustive CDD because complexity of business, nature of risk and action planmay vary in case to case .

2.1.7 EDDFOR ESTABLISHMENT OF LC AT HIGHER RlSKSCENARlO

An enhanced dne diligence process shall be applied where Party/ customer falls into a higherrisk catego ry or wh ere the nature of their trade as disclosed during the sta nda rd duediligence process suggests that enhanced due diligence shall be prudent.

The enhanced due diligence shall be applied to understand the tra de cycle, and gain assu rancerelated to compliance with cross border customs or licensing regulations, physical controls 'overthe traded goods and the legitimacy of payments flows. Some of the checks Bank sha llunderta ke (not all of which may be applicable or available in each case) include:


-.


• Make appropriate enquiries into the ownership and background of the other parti es tothe transaction e.g., the benefidary(ies) , agents, shipp ing lines, taki ng furtber steps toverify information or the identity of key individua ls as the case demands;

• Seek information from the instructing party about the freq uency of trade and thequa lity of the business re lationships existing between the parties to the transaction.This sho uld be documented to assist future due diligence;

• Check the transaction against warning notices from the external public sources, forexample the ICC's Intern ational Maritime Bureau;

• Refer the transaction to externa l agencies specializing in search ad validatio nservices in respect of b ills oflading, sh ipping services and commodity prices, forexample the ICC Commercial Crime Services;

• Check details of the so urce of the goods;• Check public source of information for prices of goods such as commodities

where the contract price is significantly different from the market [say 25%] thenconsider further investigation;

• Attend and record relationship meetings with the instructing party, visitt hem by arrangement;

• For export letter of credit, refer details to other Group resources on the ground inthe country of origin, to seek corroboration

• Check into the verification of shipments after the UCP operation is over, drawn atrandom from a sample of transactions, across a cross section of the bank's trade financeclients. This may help to identify spurious transactions where buyers and sellers act incollusion.

This may include third pa rties, [i.e. parties not associated with Bank) middlemen or tradersusing back to back or transferable LCsto conclude offshore dea ls.

This is not an exhaustive EDD because complexity of business/ nature of risk and action planmay vary in case to case .

2.1 .8 BEST PRACTICESTO COMBAT TBML & TF

a) Comparing domestic and foreig n import / export data to detect discrepancies in theHarmonized Tariff Schedule, country of origin, manufacturer, importer/exporter,ultimate consignee, broker, unit price, commodity activity by the time period, andport of import/export.

b) Capacity bu ilding and increased awareness of TBML to be achieved by enhancing thefocus on TBML through training programs. Develop ing capacity to identify anomaliesin data collected for trade transactions and in trade finance.

c) Analyzing financial information collected by the FlU to identify patterns of activityinvolving the importation/ expo rtation of currency, deposits of cur rency in financi alinstitutions, reports of suspicious finan cial activities and the identity of pa rties of thesetransactions.

d) Examining cargo movements tbrough the comparison of import / export docu mentationbetween two countries to verify that the data reported to one country's authoritiesmatches the data reported to other country's authorities.


- .ML & TF Risk Management Guidelines

e) Examining domestic import data with an automated technique, such as Unit Price Analysis, to

"compare the average unit price for a pa rticu lar commodity and identify traders who areimporting commodities at a substantially higher or lower price than the world market

f) Compar ing informatio n such as the origin, description and value of the goods, particulars ofthe consignee and consignor, and the route to shipment with intelligence inform ation in existingdata bases to detect any irregularities, targets or risk ind icators .

g) Using statistical analysis methods, such as linear r egression models, on tr ade data concerningindividual, non-aggregated imports and exports.

hi Comparing export informati on with tax declarations to detect discrepancies.

I) Paying specific attention to tr ade transactions that display known re d flag indicators ofTBML/FT activity.

j) Cross-co mparing known typologies of risk such as, those identified in the FATF typologies,report on Trade-based Money Laundering with trade data, information on cross -borde r moneytra nsfers associated with the paymen t of goods, intelligence, and tax and wealth information.

k} Taking appropriate follow-up action whe n anomalies and discrepancies in trade and financialtransactions are identi fied. Depending on the circumstances, app ropriate follow-up action couldinvolve asking the tr ader for further explanatio n and supporting documents; auditin g traderswho have presented discre pancies to check the volume of their "business, regularity of theiropera tions, the kind of good exported, and connections with organized crime or any other illicitactivity; and/ or making the complete d analysis available to the investigativeauthorities.

This not exhaustive beca use complexity of business, nature ofrisk and actio n plan may vary incase to case.

2.1.9 RED FLAGS OF T RA D E BASED MONEYLAUNDERlNG

Trade Finance Departm ent or any other concerned Department of the Bank shall always beaware of and monito r th e followin g "Red Flag" in dicato rs/situations to identify th e tra de basedMoney Laundering and Terrorist Financingactivities:

• Significant discrepan cies between the description of the commodity of the Bill of Ladin gand the Invoice.

• Significant discrepan cies between the descriptions of goods on the Bill of Lading (orInvoice) and the actual goods shipped.

• Significant discrepancies between the values of the commodity reporte d on the invoiceand the commodity's fair market values.

• The size of the shipment appears to be inconsistent with the sale of the exporte r orimporter's regular business activiti es.

• The type of commodity being shipped is designated as "high risk" for money launderingactivities.

• The type of commodity being shipped appears to be inconsistent with the exporter orimporter's regular business activities.

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ML & TFRiskManagement Guidelines

• The shipment does not make economic sense.

• The commodity is being shipped to or from a jurisdiction designated as "high risk" formoney launderingactivities.

• The commodity is being trans-shipped through one or more jurisdictions for noapparent eco nomic reason,

• The method of payment appears to be inconsistent with the risk characteristic of thetransaction,

• The transaction involves the receipt of cash (or other payments) from third partyentities that have no apparent connection with the tran saction.

• The transaction involves the use of repeat ed amendment or frequently extended lettersof credit.

• The transaction involves the use of fraud (or shell) companies.• High- value, low-volume goods (e.g. consumer electronics), which have high turnove r

rates and prese nt valuation difficulties.

• The use of a forty-feet container to tra nsport a smail amount of relatively low-valuegoods.

• The use of an advance payment for a shipment from a new supplier in a high-risk country .

This is not exhaustive because complexity of business, nature of risk may vary in case to case.

2.2USE OF ALTERNATIVE REMlTTANCE SYSTEM:

I

Fore ign Country(Asia/Pacific o r Overse a s )

CD IC lient! Eth n ic ISender C lient ccr-eects lo ca l ethri c bank er. " B an ker -

R e c ue ste rem itt errce to r-enve c ourt ry a tUS~ 1 0 ,000 In for-e ign cu r r errcv equIvalent .

C lient p",)'s b.s.nker US$ 1 0 ,0 00, a n dreceiv es ell co llection co de . Benker prom s

Tram sm <5 11 co m mis sion or te voe-eb te rate ofe :<ehange to forei gn CJ.lrrency.

nm ou re of rernrt r ence an d destination are 0corn m ur-nceteo

0 Callecno n c o de Is commun icated

Native Country

, (Asia/Pacific ),~

IR ec ip ie nt

I<3)

I Ethn ic Ir--"l BankerR ed p ierrt gives coll e ction code .Nenve OolfTency equi \o'alent of

U S $1 0 ,000 dell....e red to redplentfrom n at ive et hni c o eoke r'e

pr l....ete e arn reser"." .

T h e US$10 ,DOOde bt sreodecet-oee rr thec enkere. It -....41 1be sett!ed b yfuturetrensacnone orr edproc:alremitt ance .



INTERNATIONAL INITI ATIVES ON MLAND TF

3.1 INTRODUCTIONIn response to the growin g concern about money laund erin g and terrorist activities, theinitiatives taken by intern ational communities have acted on many fronts. This part of thisGuideline discusses the various international organ izations and their initiatives r elating toAML/CFT. The detai ls of the initiatives taken by the International Organ izations worldwide aredescribed below and BRAC bank must emphasize and should concentrate in implementing allthese internal bestpractices.

3.2 THE UNITED NATIONSThe United Nations (UN) was the first international organization to undertake significant actionto fight against money laundering on worldwide basis.In certain cases, the UN Security Council has the authority to bind all member countri es th rougha Security Council Resolution, regardless of other actions on the part of an individual country.

3.2.1 THE VIENNA CONVENTIONDue to growing concern abo ut the increased international drug trafficking and the tremendousamount of re lated money ente ring into financial system, the UN adopted the United NationsConventio n Against Illicit Traffic in Narc otic Drugs and Psychotropic Substances (1988) knownas Vienna Conventio n, named after the city in which it was signed.

3.2.2 THE PALERMO CONVENTIONIn order to fight against internationally organized crimes, the UN adopted the Intern ationalConvention against Transnational Organized Crime (200 0), named after the city in which it wassigned as Palermo Convention.

3.2.3 INTERNATIONAL CONVENTION FOR THE SUPPRESSION OF THE FINANCING OFTERRORlSMThe financing of terrorism was an international concern prior to the attacks on the United Stateson 11 Septembe r, 2001. In response to this concern, the UN adopted the InternationalConvention for the Suppression of the Financing of Terrorism (1999). The convention came intoforce on April 10, 2002 with 132 countries signing the convention and 112 countries ratifying it.

3.2.4 SECURlTY CO UN CIL RESOLUTION 1267 AND SUCCESSORSThe UN Security Council ha s also acte d under Chapter VII of the UN Charter to require memberStates to freeze the assets of the Taliban, Osama Bin Laden and Al-Qaeda and entities owned orcontro lled by them, as designat ed by the Sanctions Committee (now called the 1267 Committ ee).

3.2.5 SECURlTY COUNCIL RESOLUTION 1373Unlike an inte rnational convention, which requires signing, ratification, and recognition in locallaw by the UN membe r country to have the effect of law within tha t country, a Security CouncilResolution was passed in r esponse to a threat to international peace and security under ChapterVIIof the UN Charte r, is binding upon all UN member countries.

3.2.6 SECURlTY COUNCIL RESOLUTION 1540UNSCR 1540 (2004) imposes binding obligations on all States to ado pt legislatio n to prevent theproliferation of nuclear, chemical and biological weapons, an d their mea ns of delivery, andestablish appropriate domesti c controls over r elated materi als to prevent their illicit traffi cking.

\



3.2.7 THE COUNTER-TERRORISMCOMMITTEEAs 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 resolutionobligate d all member countries to take spe cific actions to combat terrorism. The resolution,which is binding upon all member countries, also establishe d the Counter TerrorismCommittee (CTC) to monitor the performan ce of the member countries in building a globalcapacity against terrorism.

3.2.8 COUNTER-TERRORISM IMPLEMENTATION TASK FORCE (CTITF)The Counter-Terro rism Implementati on Task Force (CTITF) was established by the Secre taryGeneral in 2005 and endorsed by the General Assembly through the Unite d Natio ns GlobalCounte r- Terrorism Strategy, which was adopted by consensus in 2006. The mandat e of theCTlTF is to enhance coord ination and coherence of counter-te rro rism efforts of the UnitedNations system.

3.2.9 GLOBAL PROGRAM AGAlNST MONEYLAUNDERINGThe UN Global Program against Money Laundering (GPML) is with in the UN Office of Drugs andCrime (UNODC). The GPML is a research and ass istance project with the goal of increasing theeffectiveness of international action against money launder ing by offering technical expertise,training and advice to mem ber countries upon request

3.3 THE FINANCIAL ACTION TASKFORCEThe Financial Actio n Task Force on Money Laundering (FATF), formed by G-7 countri es in1989, is an intergovernmental body whose purpose is to develop and promote an internationalresponse to combat money laun dering. In October, 2001, FATFexpanded its mission to includecombating the financing of terrorism. FATF is a policy-making body, which brin gs togeth erlegal, financial and law enforcement experts to achieve national legislation and regu latory AMLand CFT reforms.

3.3.1 FATF NEWSTANDARDSFATF Plenary again revised its recommendations in February 2012. The previous 40+9Recommendations was accumulated into 40 (forty) recommendations called the FATFStandards.

d5ummarv of new FATF 40 Standar sGroup Topic Recommen dations

1 Policies and Coordination 1-2

2 Money Laundering and Confiscation 3-4

3 Terrorist Financing and Financing of 5-8Pr oliferation

3 Preventive Measures 9-23

4 Transparency and Beneficial Ownership of 24-25Legal Perso ns and Arrangements

5 Power and Respo nsibilities of 26-35Competent Authorities and Othe r

6 International Co-operation 36-40


ML & TF Risk M anagement Guidelines

3.3.2 THE NCCT LISTFATF adopted a process of identifying those jurisdictions that serve as obsta cles tointernational cooperation in implementing its recommendations. The process used 25 criteria,which were consistent with 40+9 recommendations, to identi fy such non-coopera tivecountries and territories (NCCT's) and place them on a publicly available list. NCCT was aprocess of black listing non-compliant countries. Considering its massive impact on respectivecountry, the FATF introduced new implementation mechanism known as InternationalCooperation and Review Group (ICRG).

3.3 .3 INTERNATIONAL COOPERATIONAND REVlEW GROUP (ICRG)The FATF has set up the International Co-operatio n Review Group (ICRG) as a new pr ocess thatis des igned to notably engage those jurisdictions which are 'unwilling' and pose a real risk to theintern ational financial system. The ICRGprocess is designed to bind members of FATFand FATFStyle Regional Body (FSRB) that show effective commitment to the sta ndards against those thatevade thei r international obligatio ns.

3.4 ASIA PACIFIC GROUP ON MONEY LAUNDERlNG (APG)The Asia Pacific Group on Money Laundering (APG), founded in 1997 in Bangkok, Thailand, is anauto nomous and collaborative international organ ization consisting of 41 members and anumbe r of international and regional observers. Some of the key inte rnational organizationswho pa rticipate with, and support, the efforts of the APG in the r egion include the FinancialAction Task For ce, International Monetary Fund, World Bank, OECD, United Nations Office onDrugs and Crime, Asian Developm ent Bank and the Egmo nt Group of Financial Intelli genceUnits. APG is the FATF style regional body (FSRB) for the Asia Pacific regio n.

3.5 THE EGMONT GROUP OF FINANCIAL INTELLIGENCE UNITSIn 1995, a num ber of governmental units of different countries commonly known as FinancialIntelligence Units (FlUs) began working toge ther and formed the Egmont Group of FlUs(Egmont Group), named after the location of its firs t meeting at the Egmont-Arenb erg Palace inBrussels. The purpose of the group is to pr ovide a foru m for FlUs to improve sup port for each ofthei r natio nal AML programs and to coordinate AML initiatives. This support includesexpanding and systematizing the exchange of financial intelligence information, impr ovingexpertise and capabilities of perso nnel, and fostering bett er communication amo ng FlUsthrough technology, and helping to develo p FlUs world-wide.

3.6 THE BASEL COMMITTEE ON BANKING SUPERVlSIONThe Basel Committee on Banking Supervisio n (Basel Committ ee) was forme d in 1974 by thecentral bank govern ors of the Group of 10 (ten) countri es. Each country is represented by theircentral banks, or by the relevant authorities with forma l responsibility for prudentialsupervi sion of bankin g where that authority is not the central bank. The committee has noformal international supervisory authority or force of law. Rather, it form ulates broadsuperviso ry standards and guidelines and recommend s statements of best practices on a widerange of ban k/fi nancial institu tion superviso ry issues.

,.

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M L & TF Risk Management Guideline s

MAJOR NATIONAL AML & CFT INIT IATI VES

4.1 INTRODUCTIONIn line with international efforts, Bangladesh has also take n ma ny initiatives to prevent moneylaundering and combating financing of te rrorism and proliferation of weapons of massdestruction considering their severe effects on the country. BRAC Bank must comp ly with allrelevant laws, regulati ons and instruction / circulars issu ed by Bangladesh govern me nt andBangla desh Bank.

4.2 FOUNDING MEMBER OFAPGBangladesh is a founding member of Asia Pacific Grou p on Money Lau ndering (APG) and hasbee n participati ng in the annua l plenary meetin g since 1997. APG is a FATF styl e regional bodythat enforces international standards in Asia Pacific region.

4.3 LEGAL FRAMEWORK

Bangladesh government has enacted requi r ed ML/TF laws to meet the nati onal andinternational requirements. Necessary amendments of the law have been initiated from time totime.

Pr acticin g La ws in Bangladesh

e.'I 2002: Prevention of Money Laundering Act (PMLA)- 2002 [e.f April30,200 2)

e.'I 2..Q.!lli: Pr evention of Money Laundering Ordinance-200 8 (e.l. April15, 2008)

l2: 2008: Anti-Terrorism Ordinance-2008 (e.l. April 15,2008)I::'!l 2..QQ'l: Prevention of Money Laundering Act - 2009 (e.l. April 15, 2008)~ 2..QQ'l:Anti-Ter rorism Act - 200 9 (e.l. Apri l 15,2 008)I::! 20 12 : Prevention of Money Laundering Ordina nce-2 012 [e.f

January 16, 2012)J:2: 2012: Prevention of Money Laundering Act 2012 [e.f January 16,2012)I;!; 20 15: Prevention of Money Laundering Amendme nt Act,

2015l2: Money Laundering Rule prevention ru les , 20 19

4.4 OTHER VARJOUS DEPARTMENTS ANDCOMMITTEE:A lot of initiatives on AM L/CFT have been taken by Bangladesh Bank and the followi ngdepartm ents and Comm ittee have been formed to combat money lau ndering and terroristfinancing:

1. ANTI MONEY LAUNDERINGDEPARTMENT2. BANGLADESH FINANCIAL INTELLI GENCEUNIT3. NATIONAL COORDINATION CO MMITTEE ANDWORKINGCOMMITTEE4. NATIONAL ML &T F RISK ASSESSMENT (NRA)5. NATIONAL STRATEGY FORPREVENTING ML ANDTF6. ANTI MILITANTS AND DE-RADICALIZATIONCOMMITTEE7. MEMORANDUM OF UNDERSTANDING (MOU) BETWEEN ACCAND BFlU

Bangladesh Bank BFIUhas achieved the membership of Egmont group in the Egmont plenary onJuly, 2013 in Sun City, South Africa. Through Egmo nt membership, BFlU has achieved access to awid er global platform and th is will help to es tablish relationsh ip with other FlUs of differentcountries to get benefits by exchanging view s, expe rie nces and information via Egmont Secur e


M L & TF Risk M anagement Guidelines

Web.

4.5 RJSK BASED AP PROACHRecommendation 1 of Financial Actio n Task Force (FATF), the international standard setter onAML and CFT requir es financial instit utions and designated non-financial businesses andpro fessions (DNFBPs) to identify, assess and take effective action to mitigate their moneylaundering and terrorist fi nancing risks . This requirement is r eflecte d in the Money LaunderingPrevention Rules (MLPR) 2013. Rule 21 of MLPR 2013 states tha t every Reporting OrganizationFinancial Institu tion (RO-F!) shall conduct periodic risk assessmen t an d forwa rd the same to theBan gladesh Financial Intelligence Unit (BFlU) for vetting. Rule 21 also states that RO-Fl shallutilize this risk assessment repo rt afte r having vetted by BFlU.

BRAC Bank has developed Risk Assessment guidelines (see Risk Registe r in Annexure A) in linewith BFlU Circular letter no. 01/2015) for providing the basic ideas of identifying, assessing andmitigating ML & TF risks that banks may encounter in doing their businesses, vetted by CentralBank of Banglades h.

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AML & CFT COMPLIANCE PROGRAM OF BRAC BANK5.1 Introducti onBRAC Bank ltd is committed to pr event the use of its services and facilities for criminalpurposes. This compliance program and the accompanying procedures are BRAC Bank'sprimary defense against money laundering. terrorist financing and other illegal activity. Thiscompliance program is designed to help det ect and prevent attempts to use BBL or any of itsproducts and services for money laundering or other illegal activity. As a part of its efforts todeter and preve nt ML and TF, BBL is committed to coopera te with regulato rs, prose cutors andothe r govern ment authorities to achieve this goal. Adherence to all policies including thisprogram is essentia l. Knowledge of and adhe rence to the processes described in this complianceprogram is a job requir ement for those involved in any way with the acquisition and approval ofclients, and subsequent pr ovision of products and services or completion of transa ctions.

This compliance program of the BRAC Bank covers senior management role, internal policies,procedures and contro ls, compliance structure including appo introent of compliance officer,independent audit function and awareness buildi ng.

5.2 COMPONENT OFAML & CFTCOMPLIANCEP ROGRAMWhile developing the compliance program, BB L has paid specia l attention to the size and rangeof activities, complexity of operatio ns, and the nature and the .degree of ML & TF risk facing bythe bank. The pr ogram includes-

1. Senior management role includ ing their commitroen t to prevent ML, TF & PF;2. Internal policies, procedur e and controls- it includes Bank's AML & CFT policy, customeracceptan ce policy, customer due diligence (CDD), transaction monitoring. self-assessment,independe nt testing procedure, employee scree ning. record keeping and reporting to BFIU;3. Compliance structure includes establishment of Central Compliance Committee (CCC), AntiMoney Launde ring department, app ointroent of chief anti-money laundering compliance officer(CAMLCO) and Deputy CAMLCO, branch anti-money laundering compliance officer (BAMLCO);4. independent audit function- it includes the r ole and responsibilities of internal audit on AML& CFT compliance and external audit functio n;5. Awareness building pr ogram includes training. workshop, seminar for banks employees,member of the board of directors, owne rs and above all for the customers on AML & CFT issues.

5.3 COMPLIANCE PROGRAM DEVELOPMENT OF BRACBANKIn developing this AML & CFT compliance program, Bank has considered BFIU guide line ML andTF as a basis for it The bank has also considered all relevant laws, regulations, guidelinesrelating to AML & CFT and also the practices related to corporate governa nce (refer to corpo rategoverna nce policy). In draftin g the compliance program, Bank has involved all its relevantstakeholders like business functio n, Credit, Fore ign Exchange, ICC, Information technology, ADC,Opera tions, AMLD and CCC. Bank shall communicate the compliance program immediately afterthe approval f r om the board of directors to all of its employees, members of the boar d of thedirectors and othe r relevant stakeholders through email and BRAC Bank's dedicated se rver.



5.4 COMMUNICATION OF COMPLIANCE PROGRAMThe office of Company Secretary shall communicate this compliance progra m immediate lyafter the approval from the Board/Highest authority to all of employees and othe r relevantstakeholders. The compliance manual shall also be available at the following location:

Location: Your PC/ BBLTouch/IT Support/BBL Guid eline

5.5 SENIOR MANAGEMENT ROLEFor the purposes of preventing ML, TF & PF, senior management include members of the boardof directo rs of the bank, and Managing Director and CEO of the bank However, as far as anywr itten policy is concerned, it has to be approved by the Board. The Board of Directors shallapprove and issue direction regarding the duties of BBL officials at all levels (ref: Under ATALaw 2009). ICC and AMLD shall' update the boar d regar ding any noncompliance und er ML & TFcompliance

Role of Seni or ManagementBoar d of Directors (BoD) shall-

• Approve AML & CFT compliance program and ensure its implementation throughsupervis ion; approve a separa te yearly tra ining plan for AML/ CFT for BRAC Bank at thebeginning of a year.

• Issue directives to ensure compliance with the instruction of BFIU issued under sectio n15 of ATA, 2009;

• Take reasonable measures th rou gh analyzing self-assessment report and independenttesting report summary; On half yearly basis, MD & CEO shall review the reportssubmitted by AMLD of the bank and shall pass hisfher obse rvatio ns in writing.

• Understand ML & TF risk of the bank, take measures to mitigate those risks ;• , MD and CEO shall issue sta tement of commitnient to prevent ML, TF & PF in the bank by

1" week of February each year;• Ensure compliance of AML & CFT program:• Allocate enough human and other logistics for effective implementation of AML & CFT

compliance program.

Statement of Commitment of CEO or MD

As per Prevention of Money Laundering Policy of the Bank (BBL MLP Policy, page 02), ManagingDirector of the Bank declares a writt en commitment on AML/CFT measures at the beginning ofeach year addressing all the employees of the bank The management commitment of ManagingDirector generally covers the followin garea :

o Banks policy or strate gy to prevent ML, TF & PF;o procedures on effective implementation of bank's AML & CFT compliance program;o Clear indication of balance between business and compliance, risk and

mitigating measures;o Compliance is the responsibility of each employee durin g thei r normal course

of assignme nto and ignoran ce shall not be considered as the excuse for non

compliance; Point of contact for clari fication in case of anyambiguity arises;

Senior mana gement of the bank shall be accountable to ensure that the bank's policy, processand procedures towar dsAML & CFT are appropriately designed and implemen ted, and are

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effectively operated to minimize the risk of the bank being used in connection with ML& TF.All high risk items on AML/CFT compliance ground identified in ICCaudit/AMLD finding musthe escalated to the senior management and subsequently to Board Audit Committee.

Senior management shall ensure the adequacy of the human and other reso urces devoted toAML & CFT. Senior management shall advice HR to include autonomy in the Job description ofthe designated officials related to AML & CFT. For this, they may consult with CAMLCO of the

bank for better input. Senior management shall take the report from the Central Compliance. Committee (CCC) into consideration which will assess the operation and the effectiveness of thebank's systems and controls in relation to manage ML & TF risk and take any necessary action toremedy the deficiencies identified by the report in a timely manner.

Senior management sha ll advice HR for inclusion of AML & CFT compliance in their manual sothat it helps senior management to adopt HR policy for ensuring the compliance of AML & CFTmeasures by the employees of the bank. Senior management sha ll also instruct HR to developfollowing issues for proper implementation of AML & CFT measures:

o Proper administrative sanction (proportionate and dissuasive) for non-compliance ofAML & CFT measures;

o Proper weight in the annual performance evaluation of employees for extra ordinarypreventive action with regard to non-compliance;

o Written procedure to recover the fined amount from the concerned employee if the fineimposed on employee by the BFIU;

Senior management must be responsive of the level of money laundering and terrorist financingrisk when the bank is exposed to and take a view whether the bank is equipped to mitigate thatrisk effectively; all high risk/PEPS/IP account must be escalate d to sen ior management forapprova l (refer to KYC policy).

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COMPLIANCE STRUCTURE OFBRAC BANK LTD

6.1 INTRODUCTIONBRAC Bank establishes clear lines of inter accountability, responsibility and reporting.Complianc e structure of AML/CFT compliance of BRAC Bank is as follows: -

• Central Compliance Committee (CCC),• Anti-Money Laundering Division (AMLD)

Chief Anti-Money Laundering Compliance Officer (CAMLCO),• Deputy- CAMLCO• Branch Anti-Money Laundering Complianc e Officer (BAMLCO).

6.2 CENTRAL COMPLIANCE COMMITTEEBank has formed Centra l Compliance Committee (CCC) headed by CAMLCO in compliancewith BFIU circu lar 19, dated 17-09-2017. The CCC acts under the supervision of ManagingDirector & CEO of the bank As per regulatory requir ement, the designations of CCCMemb er s will be following:

• CAMLCO• Deputy CAMLCO• Head of Retail• Head of Business Applicatio ns Management & Relations• Head of Operati on• Head of Human Resources• Head of Credit Administration• Head of Corporate Banking

Members are selected as per prescribed crit er ia in BFIU circular 19, dated 17-09-201 7. Asper section 1.3[1(Ga)] of the circular, the primary respo nsibility of CCC would be toformulate organizational strategies to combat money laundering and finan cing of terrorismfrom the perspective of bank's own policy and supervise the effective implementation ofthose strides through its official secr eta riat, Anti-Money Launde ring Division. Section1.3[1(Chha)] re quires that members of CCC would mee t at least quarterly (04 meetingsyearly) to r eview the progress of impl ementation of AML/CFT activities and providerecommendations, as and when required. As per management decision, BRAC Bank will holdthese meetings along with its meetin gs arranged for the Ente rp rise Risk Ma nagementCommittee (ERMC) with a view to ensure maximum coverage while communicating AML &CFT issues with the stakeholders. The Central Compliance Committee will directly r epo rt toMD &CEO.

6.2.1 AUTHORITY& RESPONSIBILITY OFAMLD:As per section 1.3[1(Ga)] of the circular, unde r the direct contr ol and supervision of DeputyCAMLCO, AMLD is the prime mover of the bank for ensuring the compliance of AML & CFTmeas ures and is supposed to operate as a secretariat of CCe. Its main res ponsibilities are to-

• Develop bank policies, procedures and strategies in preventing ML,TF &PF;

• Coordi nate bank's AML & CFT comp liance initiatives;

• Coordina te the ML &TF risk assessme nt of the hank and review th er eon;

• Present the compliance status with recommendations befor e the CEO or MD on half

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yearly basis;

• Issue instructions for the branches, where transaction monitoring system) internalcontrol system, policies and techniq ues will be includ ed to preve nt MoneyLaundering and Terrorist Finan cing.

• Forward STR/SAR and CTR to BFIU in time and in propermanner;

• Report summary of self-assessment and independent testing pr ocedu re to BFlU intime and in proper manner;

• Impart training, works hop, semi nar related to AML & CFT for the employee of thebank;

• Take required meas ures to submit inform ation, report or documents in tim e.• For shouldering these resp onsibiliti es bank autho rity may consider to give the

following authority to AMLD-a. Appointment of BAMLCO and assign their specific job res ponsibilities;b. Requisition of human resources and logistic supports for AMLD;c. Make suggestion or administrative sanction for non-compliance by the

employees.

The AMLD will report to BFIU without any delay in case of any accountfbusinessrelationship found with any person / entity whose name/names appeared to the mass med ia(TV/ News Pape r) regarding ML, TF, PF or any predicate offences under MLPA, 2012. AMLDwill ensure proper implementatio n of steps taken to combat money launde ring andfinancing of terrorism on an annual basis maintaining coherence with the directives andguidelines provi ded by CCC. as instru cted through sectio n 1.3[l (Ga)].

For ensuring the independent audit function in the bank, AMLD has been kept separatedfrom intern al audit or compliance and control (ICC).

6.3 CHIEF ANTI MONEYLAUNDERING COMPLIANCE OFFICER (CAl"ILCO)BRAC Bank has designa ted Mr. Rais Uddin Ahmad as Chie f Anti Money Launderi ngCompliance Officer (CAMLCO) at its hea d office. Board has given sufficient au thority to Mr.Rais at its 150th board meeting through BBLAML Policy (AML Policy page 09) to impl ementand enforce corpora te wid e AML&CFT policies, pr ocedures and measures.

AUTHORITIES AND RESPONSIBILITIES OF CAMLCOAuthoriti es-

• All sta ff are required to follow the instruction issued by CAMLCO;

• CAMLCO shall not take any permiss ion or consultation from/with the MD beforesubmissio n of STR/SAR to BFIU;

• He shall maintain the confidentiality of STR/SAR and any document or informationrequir ed by laws and instructions by BFlU;

• He will access to any information of the bank as and wh en req uire d;

• HRshall arrange tr aining as required by CAMLCO.

ResponsibiIities-o CAMLCO shall monitor overall AML & CFT activitie s of the bank; he will advise AMLD to

carry out inspection on AML/CFT measures where required.o Oversee the submiss ion of STR/SAR or any document or inform ation to

BFIU in time; maintain the day-to-day operation of the bank's AML &CFT compli ance ;

o CAMLCOshall be liable to MD for proper function ing of AMLD;o CAMLCO shall review and update ML&TF risk assessment of the bank;o Ensure that corrective action s have been tak en by the bank to addr ess the deficiency

identified by the BFIU or BB.


M L & TF Risk Managemen t Guidelines

6.4 APPOINTMENT OF CAMLCO & FORMATION OF AMLD FOR CUSTODlALSERVlCE:BRAC Bank provides custo dial services under the License of Security and ExchangeCommission. Cash Management and Custodial Services und er Corpo rate Banking Divisionlook after the custodial service relate d issues. Addressing ML/TF issues is very importa ntwhile providing custodial services. Therefore, appointment of CAMLCO and formation ofAMLD unde r custodial servi ce is also a regulatory obligation. Considering the structu re ofcustodial service, existing AMLD and CAMLCO of the bank will work and look afte r custo dialservice related MLjTFissues.

6.5 BRANCHANTI MONEY LAUNDERING COMPLIANCE OFFICER (BAMLCO)As per section 1.3(5) of th e circular, CCC is responsible to designa te BAMLCOs for all thebranches and busi ness. As per the Policy, Branch Manager shall play the role of BAMLCO inBBI. As such, by dint of designation, each Branch Manager is BAMLCO for his/ her Branch.Before appointing BAMLCO, Business and HR shall ensure that the BAMLCO has sufficientknowledge in the existing acts , rules and regulations, BFlU's instructions and bank's ownpolicies on preventing Money Laundering and Terr orist Financing. Clear job descriptionsand responsibilities of BAMLCO shall be mentio ned in hisfher appointm ent lett er .

For preventing ML, TF & PF in the branch, the BAMLCO should per form the followingresponsibilities:

• Ensure that the KYC of all customers have been done prop erly and for the newcustomers, KYCis being done prope rly;

• Ensure that the UN Security Council and domestic sanction list is checked properlybefore opening an account and while making any inte rnationaltransaction;

• keep information of 'dormant accounts' and take proper measures so that anywithdrawal from these accounts sha ll not be allowed without compliance of BFlU'sinstruction;

• Ensur e regular tr ansaction monitoring to find out any unus ual transactio n (In caseof an automated bank, the bank should follow a tri ggering system agains ttransaction profile or other suitable th reshold. In case of a traditional bank,transaction should be examined at the end of day against transactio n pro fi le or othersuitable threshold. Records of all transaction monitoring shou ld be kept in the file);

• Review cash transaction to find out any structuring;• Review of CTR to find out STR/SAR;• Ensure the checking of UN san ction list before making any fore ign transaction;• Ensure that all the employees of the branch are well aware and capable to identify

any unusual transaction or any atte mpt of unusu al transaction;• Compile self-assessment of the branch regularly and arrange quart erly meeti ng

regularly covering pre valent laws and circulars on AML and CFT, instructions issuedby BFlU from time to time as per section 1.3(6) of the circular;

• Accumulate the training records of branch officials and take initiatives includingreporting to AMLD, HRand training academy;

• Ensure all the required informatio n and documents are submitte d properly to AMLDand any freeze order or sto p payment order are implemented pro perly;

• Follow the media report on terrorism, terrorist financing or other offences, likecorruption, bri bery, drug traffi cking, gold smuggling, human traffi cking, kidnappingor othe r predicate offences and find out any relationship of the branch with theinvolved person; if so the BAMLCO should make an STR/SAR;

• Ensure that the branch is maintainin g AML & CFT files properly and record keepingis done as per the requirements of chap ter 7;

• Ensure that corr ective actions have taken by the branch to address the deficiency



identi fied by the BFIU or BB.'

In BRAC Bank, BRANCH Manager of each branch will be designate as BAMLCO of theBranch

6.6 Anti-M on ey Laundering DivisionDep uty CAMLCO shall lead the Anti-M oney Laundering Division. Ther e shall be a teamunder Deputy CAMLCO to facilitate and enforce operational activity of ML(fF related issues.Deputy CAMLCO shall be liable to CAMLCO and take advice in pe rforming and discha rginghis duti es and resp onsibilities . Deputy CAMLCO is auth orized to communicate with BFIUofficials directly as requir ed from time to time with re gards to AML/ CFT. Mode ofcommunication may be over phone or mail or goAML or fax or physical visitation etc.

6.7 INTERNAL CONTROL AND COMPLIANCEInternal Control and Compliance division plays a vit al role for ensur ing impleme ntatio n ofbank's compliance program. Keeping this in mind and as per Bangladesh Bank prescribedICC guideline, BRAC has form ed an independent ICC department having sufficient autho rityfro m the Board of Directors of the bank ICC is equipped with eno ugh manpower andautonomy to look after the prevention of ML&TF.The ICChas to oversee the imp lementationof the AML & CFT compliance program of the bank and has to review th e 'Self-Assess mentRepo rt' received from the branches and to execute the 'Inde pendent Testing Procedure'appropriately. .

Int ern al auditors are resour ced and enjoy a degree of independence within the organization.Therefore, before appointing/hiring an in ternal auditor, HR shall ensure that internalauditor

1. Have sufficient operatio nal knowledge2. Have sufficient knowl edge on business, credit and foreign trade as pe r bank's

requirement3. Und erstand ML(fF risks4. Have sufficient knowledge on KYC/CDD, EDD

The internal audit must-• Examine the overall integrity and effectiveness of the AML/CFT Compliance Program ;• Examine the adequacy of Customer Due Diligence (CDD) policies, procedu res and

proc esses, and wh ether they comply with inte rna l require ments;• Dete rmine perso nnel adher ence to the bank's AML&CFT Compliance Program;• Perform app ropriate transaction testing with particular emphas is on high risk

operatio ns (products , service, customers and geographic locations);• Assess the adequacy of the bank's processes for identifying and re porting suspicious

activity :• Communicate the findings to the board and/or se nior manageme nt in a timely manner;

• Recommend corrective actio n to address the identified deficiencies;• Track previous ly identified deficienci es and ensure corre ctions are made by th e

concerned person;• Examine that corrective acti ons have bee n taken on deficiencies identi fied by the BFIU

orBB ;• Assess training adequacy, including its comprehensiveness, accuracy of materials,

tr aining schedule and attendance tracking;• Determin e the effectiveness of existi ng training programs and mater ials

6.8 EXTERNAL AUDITORExternal auditor may also play an impor tant role in reviewing th e adequacy of AML & CFTcontrols by communicating th eir findings and recommendatio ns to management via the



annual management letter, which accompanies the audit report. AMLD shall review therecommendations of external audit findings on AML/C FT matters and suggest preventivemeasures.

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AML & CFT POLICIES AND PROCEDURES ofBRAC BANK LIMITED

POLICIESBRAC Bank ltd always takes the lead in adopting the best practices recommended byregu lators and internatio nal best practi ces. Accordingly, BRAC Bank has developed its ownpolicy and procedures in line with regulatory requirement, law of the land and internationalbest practices recommended.

In Pursuit to Global and Local laws, regulations, recommendations, and guidelinesassociated with AML &CFT, BRAC Bank Limited has put-in-place the following policy:

I:l!i Anti-Money La undering Po licyI:l!i Combating Financing of Terrorism

PolicyI:;!: Customer Acceptance/KYC

PolicylilI Oversight Policy (AML/ CFT) on bKash

In broader terms, this policy provides comm itment of the bank to reasonably ensure tha tbankin g business is conducte d in conformity with the high ethical stan dards; and remainsubservient to the laws of the land, related regulations/directives of BFIU includ ing CentralBank of the country.

7.1 WRlTTEN AML & CFT COMPLLANCE PGLICYBRAC Bank has developed a written AML policy for all of its stakeholders. The last updat edAML Policy was approved at the 150'" Board meeti ng held on November 26, 2012 . Thispolicy covers all the key aspects of AML/ CFT compliance. The AML&CFT .policies arereviewed regularly and kept updat ed by AMLD at least annually or whe n needed, based onany legal/ regulatory or business/ operational changes, such as add itions or amendments toexisting AML&CFT related rule s and regula tions or business.AMLPolicy ofE BL covers th e following area

1. Basics on AML/CFT2. Role of Senior Management3. Clear roles and responsibility of BBLstaff and segregatio n ofduti es4. AML/CFT structure of BB Land Respo nsihilityassignments. CDD /KYCprinciples6. UNSCR screening7. PEPS/PFA/IP account approving mechan ism8. Risk management9. Transaction monitoring and re porting (STR)10 . Training of BBLstaff11 . Record Keeping etc. .

7.2 CUSTOMER ACCEPTANCE POLICYMoney Laundering Prevention Act 2012 req uires all reporting agencies to maintain correctand detailed information with regard to the identity of its customers during the operation oftheir accounts.

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Guidi ng Principle:

Principle 1: Do business with clients who are involved in legitimate business activities and

whose income and wealth are deri ved from legitimate sources.

Principle 2: Record the identity, background and business of all customers; identify and

know the beneficial owners of all relationships; and understand the business purposes to

which BBL goods and services are used to serve.

Principle 3: From the information gathered, reasonably estimate the types and levels of

the client's anti cipated transactions, be alert to and regularly monitor the relationship in

order to identify unusual or susp icious activity, and take ap propria te action when

questions of inconsistencies arise. The above basic principles should govern all BBL

dealings with customers and prospective custo mers.

BRAC Bank has developed customer acceptance policy integra ted with KYC policy (ref: KYCPolicy 2013; Locati on: Your PC/B BL Touch / lT-Support/BBL guide line) . The primaryobjectives are-1. To manage any risk that the services provided by the Bank may be expose d to;

2. To preve nt the Bank from being used, intentio nally or unintentionally, for ML/ TF purposes;and

3. To identify customers who are likely to pose a higher than average risk.

Detail discuss ions on Customer Acceptance Policy are described at latter part of thisguideline.Pursuant to above legal bindings, Sec. S.3 of Guidance Notes on Prevention of MoneyLaundering issued by Banglades h Bank and apropos to international standard, theManagement of the bank has developed the Customer Acceptance Policy as under:

a. No account shall be opened in anonymous or fictitious name or number ed(A/Cwithout Title).

b. No banking relationship sho uld be established with a Shell Bank. "Shell bank"refers to such banks that are incorporated under jurisdiction wher e it has nobranches or activities and which is not affiliated with a regulated financialgroup.

c. No account shall be opened or maintained in the name of individuals/ entitieswho/which are listed in UNSCR or by the Government of Bangladesh asfinancier to terrorists group or terrorism.

d. Uniform A/C Opening Forms, KYC Profile Form and Transaction Profile Formdeveloped in line with the guidelines of Bangladesh Bank sho uld be properlyfilledin.

e. . Customers' risk must be assessed as per parameters of risk perception asclearly defined in KYC Profile Form.

f. Documentation requirements and other inform ation must be collectedkeeping in mind the instructions contained in BFIU Master Circular No. 19dated September 17, 2017, the requirem ents of the AML Act-2012, the AntiTerrorism Act(Amend)-2013 and othe r Circulars and guide lines issued bythe BFIU, Bangladesh Bank from time to time.



g. The branch shall not open an account, where the bank ' is unable to applyappropriate customer due diligence measures i.e. the branch is unable to verifythe identity and/o r obtain documents requir ed due to non-cooperation of thecust omer or non-reliability of the data/information furnished to the branch. Butthe branch must be careful to avoid unnecessary harassment of the customer.

h. If it becomes necessary to close an existing account due to non-cooperation ofthe customer in providing necessary documents/information requir ed bylaw/ regulatory authori ty or non-reliability of the information /d ocumentsfurnished by the customer, the branch must be vigilant in doing so. For example,decision to close an account should be taken at a reasonably high level aftergiving due notice to the customer exp1aining the reasons for such a decision.

i. In case of opening a Politically Exposed Person's (PEP)/lnf]uential Person'saccount, the branch shall follow the instru ctions contained in BFlU MasterCircular No. 19 dated September 17, 201 7 and PEP related guidelines issued byBFlU. Opening of such types of account require prior approval from the seniormanagement and will be classified as high risk and will be required very highlevel ofmonitoring.

j. At the time of opening new account the branch must take care to seek only suchinformation from the customer which is relevant and is not intrusive. It ismentioned that the customer profile is a confidential document and the detailscontained therein shall not be divulged for any other purposes.

k. Source of funds, income or wealth and complete information on the actua l orbeneficial owners of the accounts or (for company account) the shareholder whocontrol the company or holding 20% or more share of the account must beobtained and complete KYC at the time of opening of anyaccount.

1. The branch will strive not to cause inconvenience to the general public,especially those who are financially or sociallydisadvantaged.

m. The branch will conduct necessary checks before opening a new account so as toensure that the identity of the customer does not match with any person withknown criminal background or with banned entities such as individual ter roristsor terrorist organizations etc.

n. In case of estab lishing correspondent banking relationship, thebranch/ concerned department shall follow the guidelines as contained in BFIUMaster Cir cular No. 19 dated September 17, 2017 and related guideline of BFlUmeticulously.

o. The branch shall verify the identity of the customer using reliable sources,documents etc. but it must retain copies of all references, documents used toverify the identity of the customer.

p. Bank will follow the directives of Guidelines of Foreign Exchange Transactionsrevised edition of 2009, based on rules and regulation of Foreign ExchangeRegulation Act, 1947, The Imports & Exports (Contr ol) Act, 1950 and otherrelated circulars of Bangladesh Bank to open accounts of Non-ResidentBangladeshis. .

q. The branches, where locker service facilities exist, will foll ow the identificationprocedure for their custome rs.



7.3 OVERSIGHT POLICY ON BKASH

Bangladesh Bank issued mobile banking license to bKash Limited as a subsidiary of BRAC BankLimited to handle MFS within the broader concept of 'Financial Inclusion '. BRAC Bank Limitedmust ensure that bKash Limited is pe rform ing its activity following the MFS guidelines anddir ectives issued by Bangladesh Bank (Central Bank of Bangladesh). Therefore, it becomesnecessary for BRAC Bank Limited to have an oversight Policy. in place on bKash Limited toensure smooth operation of business, services and compliance issue of bKash Limited.Accordingly, BRAC Bank board approved an oversee policy in its 1SS" Board meeting datedAugust 24,2015. The policy is enclosed with this guideline.

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ML & TF Ris~ M anagement Guidelines

PROCEDURES

8.1 CUSTOMER DUE DILIGENCE & KYC PRO CEDURES

Customer Due Diligence (CDD) combines the Know Your Customer (KYC) procedure,transaction monitoring base d on the information and data or documents collected from reliab leand independe nt sources.Bank should be able to demonstr ate to their supervisory authority to put in place, implementadequate CDO measures considering the risks of money laundering and terrorist financing. Suchrisk sensitive COOmeasures are based on-

a) Type of customers;b) Business relationship with the customer;c) Type of banking products; andd) Transaction carried out by the customer.

The COD obligations on banks under legislation and regulation are designed to make it moredifficult to abuse the banking industry for ML/TF. Followings laws/rules have directed the bankto comply with CDO measure :

1. Money Laundering Prevention Act 2012 with amendments2. Money Laundering Rule prevention rules 20193. BFIU Master Circular No. 19 dated September 17, 2017

8.2 HOW TO PERFORM CDD

Sectio n 25 of MLPAct 2012 states that all reporting institute are required to maintain completeand accura te information of their client and person acting on behalf of a custo mer

Completeness ond Accuracy: 'Comple te ' refers to combination of all information for verifying the identity of the person orentity. For example: name and detail address of the perso n, profession, source of funds,Passport/National Identity Card/Birth Registration Certificate /acceptab le ID card with photo,phone/ mobile number etc. 'Accurate' refers to such complete informatio n that has beenverified for accuracy.

Therefore, it is required for BRAC Bank to be certain about the customer's identity andunderlying purpose of estab lishing relationship with the bank, and must collect sufficientinformati on up to its satisfaction. "Satisfaction of th e bank" means satisfaction of the accountopening approving officer that is necessary due diligence has been conducted considering therisks of the customers in the light of existing directio ns.

8.3 TIMING OFCDD

Officials involved with account opening/ transaction must apply CDO measures when he/ shedoes any of the following:a) Establishing a business relationship;

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b) Carrying out an occasional tran saction;c) Suspecting money laundering or terrorist financing; ord) Suspecting the veracity of documents , data or information previousiy obtained for thepurpose of identification or verification.

8.4 CUSTOMERIDENTITY:Customer identification is an essential part of COD measures. For the purposes of this GuidanceNotes, a customer includes:

The person or entity that maintains an account with the bank or those on whose behalf anaccount is main tained [i.e, beneficial owners);

!:l: The beneficiaries of transactions conducted by professional intermediaries; andrn Any person or entity connected with a fi nancial transaction who can pose a significant

reputational or other risk to the bank.

The customer identification process applies naturally at the outset of the relationship. To ensurethat records remain up-to-date and relevant, there is a need for banks to undertake regularreviews of existing records. An appropriate time to do so is when a transaction of significancetakes place, when customer documentation standards change substantially, or when the re is amaterial change in the way that the account is operated. However, if a bank becomes aware thatit lacks sufficient informatio n ahout an existing customer, it should take steps to ensure that allrelevant information is obtained as quickly as possible.Whenever the opening of an account or business relationship is being considered, or a one-offtransaction or series of linked transactions is to be unde rtaken, identification procedures must befollowed. Identity must also be verified in all cases where money launde ring is known, orsuspected. Once verification of identity has been satisfactorily completed, no further evidence isneeded when other tra nsactions are subsequently underta ken. Records must be maintained asset out in Chapter VII, and informatio n should be upda ted or reviewed as appropriate.

8.4. 1 WHAT CONSTITUTESAPERSON'S IDENTITY?

1. Identity generally means a set of attri butes which uniquely define a natura l or legal person .There are two main constitue nts of a person's identity, remembering that a person may be anyone of a range of legal persons (an individual, body corpo rate, partnership, etc). For the purposeof this guideline, the two elements are :

• The physical identity (e.g. name, date of birth, TIN/ voter registration /p assport /Hinumber, etc.); and

• The activity undertaken.

2. Confirmation of a person's address is also useful in determining whether a customer isresident in a high-risk country. Knowledge of both residence and nationality may also benecessary, in a non-money-Iaundering context, to avoid breaches of UN or othe rinternational/National sanctions to which Bangladesh is a party. Where a passport is taken asevidence, the number, date and place of issue should be recorded.

3. The other main element in a person's identity is sufficient information about the nature of thebusiness that the customer expects to undertake, and any expected or predictable pattern oftransactions. For some business these may be obvious, however, for more complex businessesthis may not he the case. The extent of descr iption required will depend on the concernedofficer's own understan ding of the applicant's business.

4. When commencing a business relationship, concerned officers should consider recording thepurpose and reason for establishing the business relationship,

BRAe Bank ltd Page42 of 12 3


and the anticipated level and natur e of activity to be under taken. Documentation about thenature of the applicant's business should also cover the origin of funds to be used durin g therelationship. For example. funds may be transferred from a bank or the applicant's employer, orbe the proceeds of a matured insurance policy, etc.

4. Once account relationship has been established, reasonable steps should be taken by theconcerned officer to ensure that descriptive information is kept up to date as opportunitiesarise. It is important to emphasize that the customer identification pr ocess do not end at thepoint of application. The need to confirm and update information about identity, such aschanges of address, and the extent of additional KYC information to be collected over time willdiffer from sector to sector and between institutions within any secto r. It will also depend onthe nature of the product or service being offere d, and whether personal contact is maintainedenabling file notes of discussion to be made or whether all contact with the customer is remote.

8.4.2 INDlVJDUAL CUSTOMERS:Where verification of identity is required, the following information should be obtainedfrom all individual applicants for opening accounts or other relationships, and should beindependently verified by the concerned offi cer himself/ herself:• true name and/or names used;• parent's names;• date ofbirth;• cur rent and permanent address;• details of occupation/employment and sources of wealth orincome;The information obtained should demonstrate that a person of that name exists at theaddress given, and that the applicant is that person.

The date and place of birt h are important as identifier in support of the name, and are helpfulto assist law enforcement Although ther e is no obligation to verify the date of birth, thisprovides an additional safeguard. It is also helpful for residence/nationality to be ascerta inedto assist risk assessme nt procedures and to ensu re that the Bank does not breach UN or otherinternational financial sanctions. Identification of documents, either originals or certifiedcopies, should be pre- signed and bear a photogra ph of the applicant

1. Identification documents which do not bear photographs or signatures, or are easy toobtain, are normally not appropriate as sole evidence of identity, e.g. birth certi ficate,credit cards, non- Bangladeshi driving license. Any photocopies of documents showingphotographs and signatures should be plainly legible. Where applicants put forwarddocuments with which the concerne d officer is unfamiliar, either because of origin,format or language, he must take reasonable steps to verify that the document is indeedgenuine, which may include contacting the relevant autho rities or obtaining a notarizedtranslation. The concerned officers should also be aware of the authenticity ofpassports.

2. Where there is no face-to-face contact. and photographic identification would clearlybe inappropriate, procedures to identify and authenti cate the customer should ensurethat ther e is sufficient evidence, either documentary or electronic, to confirm addressand personal identity. At least one additional check should be undertaken to guardagainst impersonation. In the eve nt that internal procedures require sight of a.currentpassport or ID card where there is no face-to-face contact, then a certified true copyshould be obtained.

3. There is obviously a wide range of documents which might be provided as evidence ofidentity. It is for each concerned officer to decide the appropriateness of any docume ntin the light of other procedures adopted. However, particular care should be taken inacceptin g documents which are easily forged or which can be easily obtained using



false identities.4. In respect of joint accounts where the surname and/ or address of the account holde rs

differ, the name and address of all account holders, not only the first named, shouldnormally be verified in accordance with the procedur es set out above.

5. Any subse quent change to the customer's nam e, address, or employment deta ils ofwhich the concerned officer becomes aware should be recorded as part of the knowyour custo mer process . Generally this would be undertaken as part of good businesspractice and due diligence but also serves for money laun der ing prevention.

6. File copies of supporting evidence should be re tained. Where this is not poss ible, therelevant details sho uld be recorded on the applicant's file. In case of one-offtransactions the details shou ld be recorded in a manner which allows cross referenceto transaction records. Such insti tutio ns may find it convenient to record identificationdetails on a separate for m to be retained with copies of any supporting materialobtained.

A customer without standard identification documents: In case of opening account ofsocia lly or financially disadvantaged such as the elderly, the disab led, students and minors, acommon sense approach without ' compromising sufficiently rigorous AML procedures isrecom mended. In exceptio nal cases, Employer provided lD card (bearing the photograph andsignature of the applicant) acceptable to the bank, SSC/HSC Admit Card/Registration Card withphotograph, Stude nt lD (bearing the photograph and signature of the applicant) acceptable tothe bank may be considered on satisfaction of the Branch Manager/Relationship Manager.However, in exceptional cases manager should take advice from CAMLCO or his designate.

Note: Witho ut a valid NlD card, special permission has to be taken from CAMLCO before openingany account

8.5 VERIFICATIONOFADDRESS:

The client's reside ntial address and telephone number(s) must be recorded. Preferre d means of

validation of residence are as following:

a) Visit to residence documented by the preparation of a call repo rt in which the dealing

officer explains the basis upon which he/she concluded that the client uses the home

visited as a place ofresi dence

b) Residential address appearing on an official document prepared by a Government

Agency sup ported by online verification from tr usted site.

c) Copy of utility bill/utility card on satisfaction of the dealing officer (not beyond 3

months old). If the bill is not in the name of applicant, then option d or e has to be

exercised.

d) Sending a registered (welcome) letter to the address.

e) Contact Point Verification (CPV)

Proof of Address must match to any of the addresses (i.e. Present or Work address) sta ted in the.Account Opening Form.

8.6 VERlFICATION OFSOURCE OF FUND/OCCUPATION/BUSINESS INFORMATION

The client's occupation and position held, line of business (for business owners) along with thebusiness/ employer 's name, street address, and telephone number, must be recorded. Inaddition..branch should maintain records of cross reference of the allied or sister concerns orassociated companies of the respective account (BRPD C L- 17, dated 07 November 2012).Branches should collect and verify the document supporting source of fund of the person at the



time of establishing any business re lationship or while conducting CDD. The documentcould include present employment identity, salary certi ficate/ copy/ advice, pension book,financial statement, income tax return, business document or any othe r document that couldsatisfy the bank. The bank should request the person to produce E-TIN (Electronic TaxIdenti fication Number) certificate which declares taxable income.

8.7 INTRODUCER

a) The Client would need an introduction from an introducer who has an A/C relationsh ip

with any of BBLbranches for at least 6 months with satis facto ry tra nsaction history.

b) New accounts should be introduced by existing customers; if however staffs are

introducing new account, they should pe rsonally know the custo mer or verify customer

address persona lly.

c) No executive/FTE in sales channel is authorized to introduce customer'saccount

d) Dormant/ Inactive account holders must not be allowed to introduce a new accountholder.

e) Signature of the Introducer must be verified befor e open ing of the account

f ) Relationship between introducer and account holder must be recorded.

g) For any newly opened branch, introduction by the branch staff may be accepted up to six

month bas ed on following conditions:

1. Prior notification to BFIUwould be required.

2. Verification of IDincluding address would be requir ed

8.8 NOMINEE

a) Appointment of nominee is mandatory for ope ning an Account (individual +joint + proprietorship).

b) Photograph of nomine should be attested by the a/c holder.

c] The relationship between applicant and nominee should be acceptable to the bank.

d) No staff can become the nominee of an account holder (except parents, spouse, siblings,

children)

8.9 CORPORATE BODIESAND OTHER ENTITIES

Parti cular steps should be taken to verify the legal existence of the applicant and to ensure that

any person purp orti ng to act on behalf of the applicant is autho rized to do so. The following

documents should be obtai ned from companies:

I. Certified tru e copy of Certificate of Incorp ora tion or equivalent, details of the registe re d

office, and place ofbusiness;

II. Certified tru e copy of the Memorandum and Articles of Association, or by-laws.



III. Copy of the board resolution to open the account relationship and the empowering

authority for those who will operate the account;

IV. Details of the natu re of the business, the purpose of relationship to be established, an

indication of the expected turnover, the source of funds, and a copy of the last available

financial statements where appropriate;

V. Satisfactory evidence of the identity of each of the principal benefi cial owners being any

person holding 20% inte rest or more or with principal control over the company's

assets and any person (or persons) on whose instructions the signatories on the account

are to act or may act where such persons are not full time employees, officers or

directors of the company;

VI. Satisfactory evidence of the identity of the account signato ries, deta ils of their

relationship with the company and if they are not employees, an explanatio n of the

relationship. Subsequent changes to signato ries must be verified;

VII. Copies of the list/register ofdirectors.

The following persons (i.e. individuals or legal entiti es) must also be identified :

I. All of the directors who will be responsible for the operation of the account / tra nsaction.

II. All the authorized signatories for the account/transaction.

III. All holders of powers of attorney to operate theaccount/transaction.

IV. The benefi cial owner(s) of the company

V. The majority shareholders of a private limited company.

A letter issued by a corporate customer is acceptable in lieu of NationallD/Passport or other

photo identification documents of their shareholders, directors and authorized signatories.

Where the insti tution already knows their identities and identification records already accord

with the requirements of these notes, there is no need to verify identity again.

Additional informatio n and copy of business permission from the appropriate autho rity

should be obtained depending on the owne rship, board formati on, nature & purpose of

opening the account.

a. Signatories / Int ermedia ries

When a client delegates discretion or authority, including a power of attorney, to a third party,

or appoints an intermediary, the association between the party (ies) and the client should be

explained. Signatories/ Inte rmediaries who clearly exercise control/influence over the

relationship should be profiled.

BRAeBank ltd Page 46 of 123


b. Business Information

The client must provide the business's address and telephone number on the application. In

addition, the generic type of business must be recorded. This information and application must

be retained on file.

c. Ad dress

The client's full Business/ Office address, Registered Address, Factory/ Industry address along

.with teiephone number(s] must be recorded.

d. Source of Wealth

Gathering and recording information relating to a client' s source of wealth is another step to

ensure that BBL does business only with clients who are involved in legitimate business

activities and whose income and wealth are derived from legitimate sources.

e. Assessment of Source of Wealth Information

Sales/dealing staff must understand that the client/K ey Party's source of wealth is consistent

with hisfher knowledge of the client's business activity and personal history. Source of wealth

information must be reasonable in view of the nature of the relationship with the client

f. Comp any not listed:

Concerned RM/ Official must provide a visit report prior to opening such account Visit report

should cover the deta il information on natu re of business, product/service natu re, area of

business, who are target client of the company. RM/Official shall not proceed where he/ she gets

the sense that proposed company may defraud gullible people or business pattern is not

supported ethically with our Bank'svalue.

8.9.1 COMPANY REGISTEREDABROAD

While establishing business relationships with company incorporated or registered abroad,

bank should carry out effective checks on the source of funds and the natu re of the activity to be

undertaken during the proposed business re lationship. This is particularly important if the

corporate body is registered or has known links to countr ies without anti-money laundering

legislation and procedures equivalent to Bangladesh.

8.9.2 COMPANY NOTYETREGISTERED

Bank can open deposit account in the name of a Company which is yet to be register ed. In that

case, bank must collect Original NOC for Name (Name Release Letter / Certificate] from

RJSC; Draft Memorandum of Association & Article of Association; KYC of Entrepreneurs and

BRACBank Ltd Page47 of 123


their capital (investme nt); Board Resolution regarding declaring name of the Chairman

and Managing Director; Board Resolution of type of account to be opened, with which bank and

auth orized signatory(s) for the account and a resolution signed by all the entrepreneurs

stating a Nominee to whom a Pay Order is to be issued if the company is not registered /

fails to register (Ref: BRPD/policy -4/ 770 / 2009-1508 dated May 19, 2012). However,

Relationship Manager should take advice from CAMLCObefore opening such account

8.10 PARTNERSHIPS AND UNINCORPORATEDBUSINESSES

In the case of partnerships and other unincorp orated businesses whose partners/ directors are

not known to the bank, the identity of all the partners or equivalent should be verified in line

with the requirements for perso nal customers. Where a formal partne rship agreement exists, a

mandate from the partn ership authorizing the opening of an account and conferr ing autho rity

on those who will operate it should be obtained.

8.11 INTERNET ORONLINE BASED CUSTOMER

Bank should not offer on-line live account opening allowing full immediate operation of the

account in a way which would dispense with or bypass normal iden tification procedures.

However, initial application forms could be completed on -line and then followed up with

appropriate identification checks. These accounts should not be put into full operation until the

standardized account opening provisions have been satisfied. Customers should also be

educated about the use of internet banking and secrecy of the internet banking passw ord.

8.12 CORRESPONDENTBANKlNG:

Special atte ntion must be paid to corresponde nt banking business and enhanced due diligence

must be implemented while opening and maintaining relationship. Bank should establish or

continue a corr espondent re lationship with a foreign bank only if it is satisfied that the bank is

effectively supervised by the relevant regulatory authority, Before providing correspondent

banking service senior managemen t approval must be obtained on being satisfied about the

nature of the business of the respondent bank (BFlU Circular 10). KYC of all correspondence

relationship must be kept by concerned department as per Bangladesh Bank directive.

While establishing and continuing correspo ndent banking relationship, the following drill

should be observed so that banking system cannot be abused for the purpose of money

laundering:

BRAe Bank Ltd . Page 48 of 123


1. Before providing correspondent banking service senior management

approval must be obtained on being satisfied abo ut the nature of the

business of the respondent bank through collection of information as per

format of BFIU, Bangladesh Bank

2. Banks should establish or continue a corresponden t re lationship with a

for eign bank only if it is satisfied that the bank is effectively supervised by

the re levant authority.

3. Banks should not establish or continue a correspondent banking

relationship with any shell bank. [Here shell bank refers to such banks as are

incorporated in a jurisdiction where it has no branches or activities and

which is unaffiliated with a regul ated financial group.]

4 . Correspondent banking relati onship shall not be established or continued

with those respondent banks that established correspondent banking

relationship or maintain account with a shell bank.

5. Banks should pay particular attention when maintaining a correspond ent

banking relationship with banks incorporated in a jurisdiction that do not

meet international sta ndards for the prevention of mon ey laun dering (such

as the countries and territories enlisted in Financial Action Task Force 's Non

cooperating Countries and Territories list). Enhanced due diligence shall be

required in such cases. Detailed information on the ben eficial ownership of

such banks and extensive information abo ut the ir policies and procedures to

prevent money laundering shall have to be obtain ed.

6. Enhanc ed Due Dili gence sha ll have to be exercised in case of the respondent

banks that allow dir ect use of the correspondent account by their customers

to transact business on their behalf [i.e. payable through account)

7. PEPs involvement and downstream Correspondents to be checked.

The above instructions shall be applicable to the entire existing correspondent banking

relationship.

8.13 PROVISION OFSAFE CUSTODY AND SAFETYDEPOSITBOXESWhere facilities to hold boxes, par cels and sealed envelopes in safe custo dy are made available,it is expected that Financiol Institutions will follow the identification procedures set out inthese Guidance Notes. In addition, such facilities should only be made availab le to accountholders.

8.14 WALK-IN/ ONE OFF CUSTOMERS/ON-LINE TRANSACTIONS:Bran ch must collect complete and correct inform ation while serving Walk-in customer with atransaction BDT 50,000/= or above, i.e. a customer without having account Banks shouldknow th e sources of fund and motive of transaction while issuing DD/PO or serving for



'IT/MT. Branch shall collect complete and correct information / documents as per BFIUcircular 19 of any perso n othe r than customer deposit or withdrawal using on-line facilities .Additionally, in regards to on-line deposit, banks sho uld identify sou rces of funds as well.

Note: For online transaction of below 50,000 detailed infonnation should be collected.

8.15 NON FACE·TO-FACECUSTOMERS'Non face to face customer' refers to "the customer who 'opens and operates his account byagent of the bank or by his own professional representative without havin g physical presence atthe bank branch". The impersonal and bo rderless nature cr eates difficulty in customeridentification and verificatio n. So special attentio n shall be paid and verification of identity to beensured. Before offering such facility bank must establish a separate procedure.

8.1 6 CDD FOR BENEFICIALOWNERSBank should apply CDO obligations for the beneficial owne rs of the accounts before or duringthe courseof establishing a business relationship or conducting occasional transactions. Indoing so, banks should put in place app ropriate measures to indentify beneficial owner. Banks ,upon its own satisfaction shall ensure COO of beneficial ownership by collecting infonnationand docu ments from independent and re liable so urces that include publicly availableinformation, information from customer or information from other reliable sources. Banksshould consider followin g aspects while identifying beneficial ownership includ e:

I'Z Any natural person operating accounts on behalf of customer;~ Any person (whether acting alone or together) who has controlling inte res t or

'ownership interest on a customer who might be legal entity or legal arrangements.Where there is any doubt identifying contr olling interest, the banks should conside rother means to determine controlling interest or ownership of a legal entity orarrangements. In addition to that bank should also consider reasonable measures toverify the identity of the relevant natu ral . perso n wbo holds senior managementpositi on;

~ Any person or entity who has controlling or 20% or above shareholding within any orlegal entity.

I:!: The settler(s) , truste e(s), the protector, the beneficiaries or class of beneficiaries, orany other natura l person who exercises control over the trust

!:!: Any person in equivalent or similar position for tru st (as mentioned above) should beconsidered for other type s of legal arrangements .

Where, a natu ral or a legal person wh o holds contro lling interest, listed on a stock excbangeand sub jects to disclosure requirements or majority owned subsidiaries of such listedcompanies may be exempted from identifying or verifying beneficial ownership ,requirements.

8.17 EXCEPTION WHEN OPEN1NG A BANKACCOUNTEstablishing effective policy and proc esses to identify an ultimate beneficial owner (UBO) isessentia l in combating money laundering and terroris t financi ng. All UBOs should be identified,.declared, verified (whe re appli cable) for all new and changes to existing accountholder accountsand finan cial services and products provided to occas iona l (walk-in) accountholders. Theseprocedures must require proper due diligence and may identify un usual transactions, andpossibly report the suspicious transactions.FATF defines UBOs as natural person(s) who ultimately owns or controls an accountholde rand/ or the person on whose behalf a tr ansaction is being cond ucted. It also incorpo rates thosepersons who exercise ultimate effective control over a legal perso n or arrangement(1) Refere nce to "ultimate ly owns or controls" and "ultima te effective control" refer to situationsin which ownership/control is exercised through a chain of ownership or by means of controlother than direct control.(2) This definition should also apply to a beneficial own er of a life or othe r investment schemes,

BRAeBank Ltd ~unde" Page SOof 123

(ffI BRAC <2.l ( Bank I~'~ Ltd <?'

• Dha",a •


Money launders, te rrorists and sanctioned parties try to access the financial syste m by hidingtheir existence (i.e., true identity) during accoun t opening and se rvice request processes, th roughusing individual or non-individual accounts ope ned by the ir associatio n's or family mem bers'nam es, or opening accounts for legal entities with complex own ership structu re, or any othe rtactics to avoid detection.

Methods ofldentification an d Verification for UEOsA.Possible UEOs of Common Types of Accountholders

AccountholderAccou nt Typ e Possible UEO

ClassificationIndividual Adult Accountholder Account 1.Third nartvAdult Accounthol derAccount LPower of Attorney (POA)opened through Power of holde rAttorney 2.Third party2(POAlMinor Accountholder

1. GuardianAccountooened bv Guardian

2.Third party

1. Share holde r2. Directors

Non-individuals Corporat e Account3. Authorized Signatory4. Finan cial Control Officer

- (FCO)5. Third party

1. Shareholde r "if any"2. Dire cto rs /trust ee

Non-profit3. Authorized Signatory4.Fina ncial Control Officer

Organization/ Charity(FCO)Account5. Pro vider of materielfunds/allowances6. Tbir d Darty1.Provi der of fund s2. Directors3. Pri ncipal

Mutu al Fund Underwriter / Spo nsor4. Administrator6. Custodian7. Third Darty

Governmental/Official 1. Direc to rs/trusteesAuthorities 2. Authorized SignatoryAccount 3.Third pa rty

Page 51 of 123BRAC BankLtd

B. The identification and verification process for UEOs should be performed du ringacco unt opening, wh ile updating KYC information, when obtaining banki ng services/productsform s. Policy, procedur es and processe s must clear ly ask the acco untholder to declare the UEO,with imposing an obligatio n on the accountholder to update th e FI, if th e declared UBO ischan ged.The following must be obtained, before providing th e financial service, activa tin g the account, orissuing banking self-servic es to the accountholder for individual and non- individual accounts :1. Reaso n of having a third party as a UBO an d th e re latio nsh ip between the accountholderand the declared UBO. .2. Full KYC documen tation and information (full name, nationality, residen t address,so urce of fund s/ wealth, etc.)


3. If the accountho lder is a citizen of the U.S., it is required that they complete theappropriate form, to comply with Foreign Account Tax Compliance Act (FATCA)requirements, for individual accounts only.

The methodology may differ between institutions and accountholder types, but the UBO must beclearly identified and verified by the Fl as an essential part of KYC requirements

8.18 EXCEPTION WHEN OPENINGA BANKACC OUNTThe verificatio n of the documents of account holder may take place after the account has beenopened, provided that there are adequ ate safeguards in place to ensure that, before verificationhas been complet ed

a) The account is not closed;

b) Transaction is not carried out by or on behalf of the account holder (including any paymentfrom the account to the account holder).

8.1 9 IN CASEWHERE CONDUCTING THE CDD MEASURE IS NOTPOSSIBLEIf conducting the CDD measure becomes impossible because of the non-cooperating behavior ofthe customer or if the collected information seemed to be unreli able, that is, bank could notcollect satisfactory information on customer identification and could not verify that, bankshould tak e the following measu res:

(a) Must not carry out a transaction wi th or for the customer through a bank account;

(b) Must not establish a business relationsh ip or carry out an occasional transactionwith the customer;

(c)Must terminate any existing busin ess relationship with the customer;

(d) Must consider whether it ought to be making a re port to the BFlU through an STR.

Branch shall consider whether an inability to app ly CDD measures is caused by the customer.In this case, the BM should consider whether the re are any other ways of being reasonablysatisfied as to the customer's identity. In either case, the BMJRM should consider whetherthere are any circum stances which give grounds for making a report to BFlU.

If the AMLD concludes that the circumstances do give rea sonable grounds for knowledge orsuspicion of money laundering or terrorist financing, a report must be sent to the BFlU. Thebank must then retain the fund s unti l consent has been given to retu rn the funds to the sourcefrom which they came. .If AMLD Jrelevant stakeholder conclude that there are no grounds for making a rep ort, theywill need to make a decision on the approp riate cours e of action. This may be retaining thefunds while it seeks other ways of being reasonably satisfied as to the customer's identity, orreturning the funds to the source from which they came. Returning the funds in such acircumstance is part of the process of terminating the relationship; it is closing the account.rather than carrying out a transaction with the customer through a bank account.

Page 52 of 123BRAeBank Ltd

8.20 RELIANCE ONTHIRD PARTYBank could rely on the third parties to perform the CDD measures with the prior permission ofBangladesh Bank which may includeI) Identify and verify customer identity;ii) Identify the beneficial ownership and control structure ;andiii ) Identify the purpose and nature of the business relati onship under the followin gcriteria:

• A third party should immediately obtain necessary information related to i) - iii) asmentioned above;

• All necessary data and docume nts held with the third party must be available for thebanks without any delay;

• Bank should verify that third party is regulated, supervised and monitored for, and hastaken appro priate measures in complia nce with CDD and rec ord keeping require mentsset out in this Guide lines .


8.21 MANAGEMENT OF LEGACY ACCOUNTSLegacy accounts re fer those accounts opened before 30 April, 20 02 and yet to update KYCprocedur es. These legacy accounts should be treated as "Dorm ant". No withdrawals sho uld bepermitted in those accounts; however, deposits can be permitted. These accounts will be fullyfunctional only after conducting proper CDO measures. AMLD should preserve data of suchaccounts at their end. BRAC Bank has managed all legacy accounts (1102 accounts) belong toGulshan & Nawabpur bran ch suitably.

8.2 2 CUSTOMER UNIQUE IDENTIFICATIONCODEBranch must use unique identification code for any customer maintain ing more than oneaccount or availing more than one facilities. Such unique identification system could facilitate usto avoid redundancy, and saves time and resourc es. This mechanism also enables branches tomonitor customer tr ansactions effectively.


Mt & TF Risk Manag ement Guidelines

8,23 POLlTICALLY EXPOSED PERSONS (PEPs), INFLUENTIAL PERSONS AND CHIEFEXECUTIVES OR TOP LEVEL OFFICIALS OFANY INTERNATIONAL ORGANIZATION

All Clients must be subject to an assessment to dete rmine whether they are PEP's or InfluentialPersons or chief executives or top level officials of any international organization and theirlinked entities. These customers pose a higher risk of money launderin g,bribery, corruption andreputa tional risk to the bank due to their current or former position of political power orinfluence, which makes them more vulnerable to corrupti on. Relationships with thesecustomers may increase the risk to the bank due to the possibility of those individuals holdingsuch positions may misuse their power and influence for personal gain or advantage or for thepersonal gain or advantage of their Close Family Members and Close Associates. The person'sstatus (PEP'S, Influential Persons and chief executives or top level officials of any internati onalorganization) itself does not incriminate individua ls or entities. It does, however, put aprospective or existing Client into a higher risk category.

8,23.1 DEFINITION OF PEPsPolitically Exposed Persons (PEPs) refer to "Individuals who are or have been entrusted withprominent public functions by a foreign country, for example Heads of State or of government,senior politicians, senior government, judicial or military officials, senior executives of stateowne d corpo rations, important political party officials." The following individuals of othe rforeign countries must always be classed as PEPs:i. Heads and deputy heads of sta te or governm ent;Ii. Senior memhers of ruling party;iii. Ministers, deputy ministers and assistant ministers;iv. Members of par liament and/or national legislatures ;v. Members of the governi ng bodies of major political parti es;vi. Members of supreme courts, consti tut ional courts or othe r high-level judicial bodies whosedecisions are not suhject to furt her appeal, except in exceptionalcircumstances ;vii. Heads of the armed forces, other high ranking members of the armed forces and heads of theintelligence services;viii. Heads of state-owned enterprises.

8.23.2 CDDMEASURES FORPEP'SBranch need to identify whether any of their customer is an IP. Once identified followinginstru ctions shall have to be followed to ensure Enhanced Due Diligence, while opening andoperating the account:

Identify risks associa ted with opening and operating the accounts ofPEPs/PFAs

Obtain senior managements' approval hefore establishing such business relationship;

Documentati on should be sufficient to demonstrate that the proposed accountactivity is consiste nt with the financial profile and legitimate source of wealth of theapplicant

Business should observe all formalities as detailed in Guidelines for ForeignExchange Transactions while opening accounts ofnon-r eside nts;

All instructions as detailed for PEPs shall equally apply if business relati onship isestahlished with

The known members of the individual's immediate family (i.e., spouse, parents, children,siblings, in-laws);Anyknown economic dependents of the individual;

-, '"

.'. .'.. . '.'

" . .,' ....' ..... :


)


Any corpora tions, trusts or other entities in which the individual is known to have abeneficial or ownership interes t or is known to use as a conduit;Any pers on who is in a position to conduct substantial tra nsactions on behalf of thepolitical figure, such as the holder of a power ofatto rney.

All provisions of Foreign Exchange Regulation Act, 1947 and issued rules andregulations by Bangladesh Bank under this act have to be complied accordingly.

App roval Requi r ement: Accounts under PEPs as well as accounts for their principals may be

accepted only with the prior wri tt en approva l of the CAMLCO with recommendation from

resp ective Business Head. Direct reports (I.e. Head of Branch Banking, Head of Sales etc) of the

Business head can reco mmend for opening such report However, email app roval using BRAC

Bank network only is acceptable.

8.23. 3 DEFINITION OF INFLUENTIALPERSONS'In fluential pe rsons' refers to, "Individuals who are or have been entruste d with prom inentpublic functions, for example Heads of State or of government, senior politicians, seniorgovernment, judicial or military officials, senior executives of state owned corporations,important political party officials."

The following individuals must always be classed as Influential persons:(a) Heads and deputy heads of state or government;(b) Senior members of ruling par ty;(c) Ministers, state ministers and deputy ministers ;(d) Members of parli ament and/or national legislatures;(e) Members of the govern ing bodies of major politicalparties;(f) Secretary, Additional secre tary, joint secreta ry in the ministries;(g) Judges of supreme courts , constitutional courts or other high-level judicial bodies whosedecisions are not subject to further appeal, except in exceptionalcircumstances;(h) Governors, deputy governo rs, executive directors and general managers of centralbank;(i) Heads of the armed for ces, othe r high ranking members of the armed forces and heads of theintelligence services;Ul Heads of state-owned enterprises;(k) Members of the governi ng bodies of local political parties;(I) Ambassadors, charges d'affai res or other senio rdiplomats;(m) Citymayors or heads of municipalities who exercise genuine political or economic power;(n) Board members of stat e-owned enterprises of national political or economic importance.

Whether an individual is an influential person or not will depend on the prominence orimportance of the function that he/ she holds, and the level of corruption in th e country, thereputation and personal links of the individua l and whether he/she has any links to industrie sthat are prone to corruption. If the individual does not hold sufficient influen ce to enable themto abuse his/her power for gain, they should not be classified as an influential person.

IP for these purposes, in short, is defined to includ e any person who, whether by election,

appo intment, military action, heredity, or othe r means.



1 Politicians All levels Immediate family &

Dependents

2 Bureaucrats Joint Secretary & above. Do

3 Technocrats Executive Engineer & above Do

4 Judicial District Judges & above Do

5 Defense Personnel Brigadier & above Do

6 Law Enforcing Agencies Supe rinte ndent of Police/ Do

Comm. of Tax/ Customs, Vat &

Excise & above.

8.23.4 CDD MEASURES FOR INFLUENTIALPERSONS

Branch needs to identi fy whether any of their customer is an IP. Once identifie d, the following

instru ctions shall have to be followed to ensur e Enhanc ed Due Diligence, wh ile opening and

operating the account:

Identify risks associated with ope ning and operating the accounts ofPEPs/PFAsobtain senior managements' approval before establishing such business relationship;Documentation shou ld be sufficient to demonstrate that the proposed account activity isconsiste nt wi th the financial profile and legitimate source of we alth of the applicantBusiness shoul d observe all formalities as deta iled in Guidelines for Fore ign Exchan geTransactions while opening accounts ofnon-residents;

All instructions as deta iled for IP shall equally apply if bu si ness relationship is establishedwith

The known members of the ind ividual's immediate family (i.e., spo use, parents, children,siblings, in-laws);Any known economic dependents of the individual;Any corp orati ons, trusts or other entiti es in which the individual is known to hav e aben eficial or owne rship interest or is kno wn to use as a conduit;Any person who is in a position to conduct substantial transactions on behalf of thepolitical figure, such as the holder of a power ofattorney.All provisions of Foreign Exchange Regulati on Act, 1947 and issued ru les andregulations by Bangladesh Bank under this act have to be complied accordingly.

App roval Req uir ement: Accounts under IPs as well as accoun ts for their principals may beaccepted only with the prior written approval of the CAMLCO with recommendation fromrespective Business Head. Direct reports (1.e. Head of Branch Banking, Head of Sales etc) of theBusiness bead can recommend for opening such report However, email approval using BRACBank network only is acceptable.



8.23.5 DEFINITION OF CHIEF EXECUTIVES OR TOP LEVEL OFFICIALS OF ANYINTERNATIONALORGANIZATION

'Chief executive of any internati onal or ganizati on or any top level official' refers to,"Persons who are or have been entrusted with a prominent functio n by an internationalorganization refers to members of seni or managem ent, Le, directors, deputy directors andmembers of the boards or equivalent functions." The heads of international organizati ons andagencies that exercise genuine political or economic influence (e.g. the United Nations, theInternational Monetary Fund, the World Bank, the World Trade Organization, the Interna tio nalLabor Organization) must always be classed as this category.

8.23.6 CDD MEASURES FOR CHIEF EXECUTIVES OR TOP LEVEL OFFICIALS OF ANYINTERNATIONALORGANIZATIONBranch need to identify whether any of their customer is a CEO or top level officials of anyintern ational organization. Once identified banks need to apply enhanced COD. Moreover, theyneed to perform the following-(a) Branch have to adopt the Risk Based Approach to determine whether a customer or the realbeneficial owner of an account is a CEO or top leve l officials of any international organization;(b) Obta in senior managements' approval before establishing such business relatio nship;(c) Take reasonable measures to establish the so urce of fund of the account of a CEO or top levelofficials of any international organization;(d) Monitor their transactions in a r egular basis; and(e) Allprovisions of Foreign Exchange Regulation Act, 1947 and issued rules and regulations byBangladesh Bank under this act have to be complied accordingly.

8.23. 7 CLOSE FAMILYMEMBERS AND CLOSE ASSOCIATES OF PEPS, INFLUENTIAL PERSONSAND CHIEF EXECUTIVES OR TOP LEVEL OFFICIALS OF ANY INTERNATIO NALORGANIZATIONIn addition, close family members and close associates of these categories will also be classifiedas the same category. Close Family Members include :(a) The PEP's/influential persons/chief executive of any intern ational organi zation or any toplevel official's spouse (or any person considered as equivalentto the spouse);(b) The PEP's/ influential persons/chief executive of any int ern ational organ izatio n or any toplevel official's childre n and their spouses (or persons considered as equivalent to the spouses);and(c) The PEP's/influential persons/chief executive of any intern ational orga nizatio n or any toplevel official's par ents;There may be exceptional circumstances wh ere the individual should not be classified as a'Close Family Member' of the PEP, such as estrangement, divorce etc. In such cases, thecircumstances must be tho roughly investigated, examined and caution exercised.In addition, where other family members such as the siblings, cousins, relatives by marriage ofthe PEP are deem ed, by virtue of thenature of the relationship, to have a close relationship withthe PEP, they should also be classified as PEPs.A Close Associate of a PEP/ Influentia l Person/Chief executive of any international organizationor any top level official includes :(a) An individ ual who is known to have joint beneficial ownership or control of legal entities orlegal ar rangements, or any other close busine ss relations with the PEP; and(b) An individual who has sole beneficial ownership or contro l of a legal entity or legalarrangement which is known to have been set up for the benefit of the PEPIn addition, it should include any person p ublicly or widely known to be a close businesscolleague of the PEP, including perso nal advisors, consultants, lawyers, accountants ,colleagues or the PEP's



fellow shareholders and any person(s) that could potentially benefit significantly from closebusiness associati ons with the PEP.

8.23.8 COD MEASURES FOR CLOSE FAMILY MEMBERS AND CLOSE ASSOCIATES OF PEPS,INFLUENTIAL PERSONS AND CHIEF EXECUTIVES OR TOP LEVEL OFFJCIALS OF ANYINTERNATIONAL ORGANIZATIONBranch needs to identify whether any of its customers are a family member or close associatesof a PEP, IP or CEO or top level officials of any inte rnational organization. Once identifi ed,branch needs to apply enhan ced COD measures. Moreover, the y need to perfo rm the sameprocedure for PEP/ IP account.

8.24 KYC Procedure:

KYC procedures refer knowing a customer physically and financially. This means to conduct aneffective KYC, it is essential to accumulate complete and accurate information abo ut theprospective custo mer,

Each concerned officer is required to perform due diligence on all prospective clients prior toopening an account. Tills process is completed by fulfilling the documentation requir ements(Account Application, Bank References, Source of funds and Identification forexample)

The verification procedures establishing the identity of a prospective customer should bas icallybe the same whatever type of account or service is required. It would be best to obtain theidentification documents from the prospective customer which is the most difficult to obtainillicitly. Nosingle piece of identification can be fully guaranteed as genuine, or as being sufficientto establish identity, so verification will generally be a cumulative process. The overrid ingprinciple is tha t every bank must know who their customers are, and have the necessarydocume ntary evidences to verify this.Where the bank is unable to identi fy the customer and verify that customer's identity usingreliable, independent sou rce documents, data or information, unabl e to identify the beneficialowner taking reasonable measures, unable to obta in inform ation on the purpose and intendednature of the business relationship, it should not open the account, commence businessrelations or perform the tr ansaction; or should terminate the business relationship; and shouldconsider making a suspicious transactions report in relation to the customer.

8.25 KYC PROFILING:KYC profile gives the basic informatio n about the custo mer like, Name, Address, Tel/ FaxNumhers, line of bus iness, Annual sales. If the customer is a Public Figure, the account willbecome automatically a High Risk Account. The KYC Profile inform ation will also include theobservations of the Institution's Staff/Officer when they visit the custo mer's business place like,the business place Is owned or re nted. the type of clients visited, by what method is the clientpaid (cheque or cash). The Staff/Officer will record his observations and sign the KYC Profileform.

8.26 RlSK CATEGORlZATION- BASEDONACTIVITY/ KYCPROFILEWhen opening accounts, the concerned staff/Officer must assess the risk that the accountscould be used for "money laundering", and must classi fy the accounts as eith er High Risk orLow RiskFollowing seven risk categories are scored using a scale of 1 to 5 for risk profiling.

o Occupation or nature of customer'so Business Net worth / sales turnover of

the customero Mode of opening the account



a Expected value of monthly transactionso Expected number of monthly transactionso Expected value of monthly cash tra nsactio nso Expected numb er of month ly cash transactions

The risk scoring of less than 14 indicates low risk and mor e than 14 would indicatehigh risk The risk assessment scores are to be documented in the KYC Profile Form.However, branch may judgmentally override this aut omatic risk assessment to "HighRisk" if it believes tha t there are appropriate reasons to the risk. This override decisionmust be documented (reasons why) and approved hy the Branch Manager/Branch AMLCompliance Officer.

8.26 .1 APPROVALPROCEDURES:Accounts under 'High Risk' as well as accounts for their principals may be accepted only withthe prior writte n approval of the CAMLCD with recommendation from respective BusinessHead . Direct reports [i.e, Head of Branch Banking, Head of Sales; Head of small SME etc) of theBusiness head can recommend for opening such account However, email app roval using BRACBank network only is acceptable.

8.27 REVIEWAND UPDATE:Bra nch/ Concerned business shall take necessary measures to review and updat e the KYCof thecustomer after a certa in interval or at least as per BFlU instruction/circular.

Low Risk Account: This procedur e shall have to be conducte d in every five years in case of lowrisk customers.High Risk Account: Furthermore, this procedure shall have to be conducte d in every year in caseof high risk custo mers.General Conditions: But, branches 'shall updat e the changes in any information on the KYCassoon as bank 'gets to be informed. Moreover, branch may update KYC information anytim e ifthere is any particu lar necessity to do so. Depending on the updated inform ation, the risksassociated with these accounts shall have to be asses sed again without any delay. .

Any subsequent change to the customer's name, addres s, or employment details of which thebusiness becomes aware should be recorded as part of the CDD process. Generally, this wouldbe undertaken as part of good business practice and due diligence but also serves for preventionof money laundering and terrorist financin g.

Branch/ Business should collect the announceme nt of cust omer about the Transaction Profile ofcusto mer account in the specified form. M er reviewing the nature of the custo mer, the sourceof money in the account and the nature of transaction, branch should again collect th eTransaction Profile along with the ame ndments in it from the customer by reviewing th etransactions of the customer within 6 (six) months of establishing business relation andassessing the effectiveness with a logical conside ration

Enhanced Due Diligence measuresBanks should conduct Enhanced CDD measur es, when necessary , in addition to normal CDDmeasures. Bank should conduct Enhanced Due Diligence (EDD) under the followingcircumstances:

• Individuals or legal entities scored with high risk;• Individuals who are identified as politically exposed persons (peps) , influential pers ons

and chief executives or top level officials of any internationalorganization;

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• Transactions identified with unusual in regar ds to its pattern, volume and complexitywhich have no appare nt economic or lawful purposes;

• While establishing and maintaining business relationship and conducting transactionwith a person (including legal representative, financial institution or any otherinstitution) of the countries and territories that do not meet inte rnational stan dard incombating money laundering and terrorism financing (such as the countries andterritories enlisted as High - Risk and Non- Cooperative Jurisdictions in the FinancialAction Task Force's Public Statement) .

Enhanced CDD measures include:

• Obtaining additional information on the customer (occupation, volume of assets,information available through public databases, internet, etc) and updating moreregularly the identificatio n data of custome r and beneficialowner.

• Obta ining additional information on the intended nature of the business relationship.• .Obtaining information on the source of funds or source of wealth of the custo mer.• Obtaining information on the reasons for intended or performed tra nsactions.• Obtaining the approval of.senior management to commence or continue the business

relationship when applicable.• Conducting regular monitoring of the business relationsh ip, by increasing the number

and timing of controls applied and selecting patterns of transactions that need furtherexamination.

• Makingthe concerned bank officials aware about the risk level of the customer.

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TRANSACTlON MONlTORING PROCESS

On-going account tra nsaction monitoring is an impo rtant element of AML/CIT program. It is aregulatory obligation to pay special attention to all complex, unusually lar ge Transactions, andall unusual patterns of transactions, which have no apparent economic or visible lawful purpose.Tbe background and purpose of such transactions should, as far as possible, be examined, thefindings established in writing, and be available to help the relevant authorities in inspectionand investigation.

Possible areas of monitoring that includes but not limited to thefollowings:

~ Transaction type!;li Transaction frequency.~ Unusually large amounts!2 Geographical origin/destination~ Changes in account signatories~ Large volume transactionI;? Transaction inconsist ent with the TP~ Transaction in High RiskAccount~ Transaction in PEPs/ 1Paccount

9.2 TRANSACTION PROFILE:TP is estimated transacti on volume which acts as parameter of transaction to help forunderstanding/ ascertaining the genuineness of actua l transaction. The following steps and pointsshould be noted while preparing transaction pr ofiles:

o Take interview with the customer and request him/ her to fill in the Transaction Profile Formas recommended by Bangladesh Bank The main features of the Form for both deposit andwithdrawa l would be:

- Various types of transactions (i.e. nature of transactions) - No. of transactions (monthly) Maximum size (per transaction) - Total value (monthly)

o Before filling in, it has to be ensured by the Designated Office r that the custo mer'sunderstanding is sufficient to fill the required cells of Transaction Profile Form.

o Assist customer in filling the Transaction Profile Form if any complexity arises.

o Officer must match the information menti oned in TP with all points covered in KYCguidelines. He has to establish normal resemblances between the two declared statements.Questions might be politely asked to customer for any noted discrepancy.


N;Jt'lue 8t. Volume of Transit:

BRAe Bank Ltd


• onthly]

What will beyour total\ C ash _:

Transaction

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9.3 ON·GOING TRANSACTION MONITO RlNG BY BRANCHES

Following reports need to be generated at pr escribed frequency to ensure effective monitoring.

a] Excessive Cash Movement Report: On a daily basis branch will generate a large value

Cash Transaction Report and review the transaction pattern.

Note : daily eTR 7 lac & above for deposit transaction

-~~~n~h~ri".tsout.D:ily.~>_c_essjve cash~.o~:=~.nt_~eport(:CMR} on last working _.:J.~~~~~i~~;~~;~~~~:~~F/~~~~~t:~~;~=~::=:~ :~.~:~1

, . - Manu ally writes the annota t ion on the printed copy Of Daily Cash Transaction Report""iwith initia l and date .~... . . . '. '.,. , " ' " • . • _ _ , .,' " ,,' . , ~ ,. __• ••• • ",_ <o , •. _, ," " , ' . ,,-,~, _ . - ' .... _ ' •. . ' '. ' . ' . . ,' ' ' '

-When reason/ source of cash dep osit does not match with the profession, callsthe . )customer and collects the transaction reason .'" ' ,,' • • '. " ... ' _' . _ _." •• ,. _ _._ . , .. _1 . ~ .-• . _,_ . " __, • • __ .. ... .. ,._ f _ ", , "._ ,--, _ . .. _. ~'._' _, ,~ __ ~ .. "," ·, . ' , U ' " C", ..._. ,' no.. ~ .. • . .... ~ _ . __ •

- W rit es the outcom e of the discussion with the custome r on the Daily ECMR report and jf ')suspicion arises, AMlD and BBL are info rmed through e-mail 1:

. -.-, "':'=~,'~ " ", _.",. " ~:!"",, .. . ' _ . ,. . .~=~~ ..-::~_~~..,.,..~r'.,~':':--1

~9i:'<Ii<:fl -Branch Manager (BM1!Customer Service Manager (CSMj signs wit h dat e on the ECM R . }and preserves the report for audit purpose. . .

b) EXCEPTION REPORT/ TP BREACH REPORT:

On a monthly basis, branch will generate an Exception Report of customers whose transaction volumeexceede d the transaction limit (more than 20%) mentioned in the transaction profile and will review theaccoun ts. If, after confirming with the customer, the transact ion tr end continues, then the Account Officerwill be responsible for documenting the reasons as to why the transaction pr ofile has changed and shouldamend the TP & KYC profile accordingly.


M L & TF Risk M anagem ent Guidelines

l ..,'-'..."~ ,,·~ ·,~'" ""V" ·· .....~-='~'- ...:J~v;ation Is more than 20% with the given TP then wrtt es down the specif ic reason on the TP breach re;:;"lL-.. after consultat ion w ith the respective custome r --'

.. .. """"=.,_:""-"'''',,",. ."....""'....."..•.'"".....,..,..,.,,.,,......"';;1 t:;""""'"'"''''~'''' ."..",.........,....,....,.,.,.,...,.....,..,...,.,.,-...' -

•• .>-t - - :JIf any significant brea ch of TP is found , BAMlC O review the bank statement and if found suspicious invit es customer

to the branch to interview and check whether the transaction 15 genuine or not

'. . . ... .. . '3-.r-' . . . . ?" . -

If the transaction seems to be genuine BM suggest custom~r to cha nge TP proving supporting documen ts (If req: : ' d1. 1and 8M updat es the annot2 tion '"TP Updated on DO/MM /YY" in TP breach report

c:":-~, ~~., 'M .~",-"".H::-_.:.-",""",,,"'""':J", account opening documents and raise STR and inform the same to AMlD

_. _ , ' -- , - - '-......~. . - ,..".". . -- , - - - ~ " - - - ,. _ , , ' - ,$ . ~,~ ,.

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BRAe Bank ltd


c) CTR (Cash Transacti on Rep ort):Cash transaction (deposit/withdrawal) for 10 lac taka or more in a day falls und er CTRthreshold. All such transactions are required to submit to Central Bank in softcopy. In case ofcash deposit (regardless of amount in the Govt. accounts or accounts of the Govt, ownedentities, CTR reporting is not required. But in case of cash withdrawal, such report is to besubmitted as per prescribed eTR format Before sending the rep ort to BFIU and BangladeshBank, respective branch will review the transactions to detect suspicious tra nsac tion and if anysusp icion arises, the branch will send the report to AMLD. Concerned department will preparethe repo rt as per the format provided by the regulator.

d) Remittance Tra nsaction Report: Asystem has been developed by the bank to monito rremittance transactions.

'--'--'-~----.-.---~'

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ML & TF Rjsk M anagemen t Gukie tines

As per section 9 of BFlU Circular 19 Dated: 17-09-2017, wire transfer refers to financialtransaction thro ugh which any bank of Fl pays to the beneficiary (individual/organization) byassista nce of any other bank or branch using electronic medium, upon request of the applicant(individual / organization).

We are required to ensure collection of the' following information for all kinds of wire transferaccording to BFlUCircular 19, Clause 9.1 and as follows:

1. Cross-Border Wir e Tra nsfer:It refers to the execution of electro nic financial transaction between applican t and beneficiaryfrom different countries. Chain of relat ed transactio ns, for such applicant and beneficiary, atleast one (01) transfer execute d cross-border, is included unde r this as well.

A. Transactions of USD 1,000 or above requir e banks-To collect appro priate information regarding the applicant/ originato r (on whose requestthe wire transfer is going to be executed) andTo send the same to the intermediary/ beneficiary bank.

Transactions of amount below USD 1,000 require banks to preserve app ropriate informationregarding the applicant / originat or only to detec t the applicant late, if required.

B. To collect informatio n regar ding the beneficiary while paying the beneficiary throughcross-border wire transfer.

C. To collect inform ation regarding the applicant( along with account numbe r) and all thebeneficiaries in batch files in aspect of wire tra nsfer to more than one beneficiaries uponrequest of a single applicant.

2. Domesti c Wir e Transfer:It refers to the execution of electronic financial transaction between applicant andbeneficiary from a similar country. Chain of related tran sactions, for such applicant andbeneficiary, having at least one (01) transfer executed cross-border, is included unde rthis as wel1.

A. Identification and verification of information regarding both the app licant and theben eficiary through effectively performing KYC and CDD( as per clause 3)

B. 2(A) applies for domestic wire transfers with payment instructions through usage ofdebit/credit card( except purchasing of products / services)

C. Above-mentioned instructions are not compulsory for wire tran sfer where beneficiaryis government, semi-government or autonomo us organization. Moreover, interbankwire transfers are also relieved of perfo rming KYC, CDDas described in 2(A).

-Other Directions Regardin g Wire Tran sfers:

Related guidelines, circulars issued by Bangladesh Bank are to be followed for suchtransactions.As per clause 2(3) of this circular, no tr ansaction or relationship with any shell bank and asper clause 10, prevention of Financing of Terrorism and Financing of Proliferati on ofWeapons of Mass Destructio n rules ar e to be followed in case of cross-bo rder wiretransfers.

• Duties of Ordering, Intermediary & Beneficiary Bank:

1. Ordering Bank:

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Ensuring appropriate and complete information of the applicant( Name, Account number,Occupation. Purpose of Transaction)Ensuring meaningful information of the beneficiary( Name, Place, Purpose ofTransaction)Preserving this information for at least five (OS) years and provided upon request ofentitled authorities, if required.

Z. Int ermedia ry Bank:Bank working as an intermediary between the ordering and the beneficiary bank is subjectto the following rules:Ensuring appropriate and complete information of the applicant and the bene ficiary(Name, Account number, Occupation, Purpose of Transaction)Ensuring verification to detect data insufficiency( if exists)i n the provided information ofthe applicant and the beneficiaryPreserving this information for at least five (OS) years.Existence of Risk-based principles and policies of the intermediary bank for execution,holding on and required following-up for wir e transfer, if data insufficiency in the providedinformation of the applicant and the beneficiary exists .

3. Beneficiary Bank:Having a risk-based procedure to verify the data sufficiency in the information of theapplicant and the beneficiary.Verifying the provided information (if required) from inter-bank mutual relationships andothe r accessible sources.Collection information of the beneficiary while paying to the beneficiary and preservingthe information for at least five (OS) yearsExistence of Risk-based principles and policies of the beneficiary bank for execution,holding on and required following-up for wire tran sfer, if data insufficiency in the providedinformation of the applicant and the beneficiary exists.

9.4 MONITORING OFSTRUCTURING:Structuring is a money laundering technique, which involves the slitti ng up of large cash depositinto a number of smaller deposit to evade the suspicious activity reporting requir ement of thebank. Structuring can be done:

• Regular deposits of cash into accounts in amounts that fall below reportin g thr eshold.• Mainta ining accounts at multiple bank branches with ill intention• Using third parti es to make deposits into single account or multiple accounts• Purchasing instruments using cash

9.4.1 STRUCTURING IDENTIFICATION:Branch shall generate the Excessive Cash Movem ent Rep ort on daily basis. The repo rtcaptures all single transactio ns above 7 (seven) lac. This repo rt shall assist the concernedperson to identify attempt of structuring by any customer.

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REPORT1N G TO BFlU

Obligations und er MLP Rules, 2013 & various instructions from BFIU, bank is obliged to sendfollowing reports to BFIU

L Suspicious Transa ction Report /Suspicious Activity Report2. Cash Transaction Report3. Self-Assessment &Independent Testing Procedure4. Various AML return

10.2 SUSPICIOUS TRANSACTION REPORING PROCEDURES:

10.2.1 SUSPIClOUS TRANSACTIONWill often be one which is inconsistent with a customer's known, legitimate business or personalactivities or with the normal business for that type of account.Account transactions or othe r activities which are not consistent with the due diligence file'The bank knows of no reasonable explanatio n for the transaction after examining the availablefacts, including the background and possible economic purpose of the transactionAtran saction designed to evade any regulatory requirements under APPLICABLE LAW

Money Laundering Prevention Act, 2012 defines suspicious tr ansaction asfollows- 'suspicious transa ction' means such transactions -

• Which deviates from usual transactions;

• Of which there is ground to suspectthat,o the property is th e proceeds of an offence,o it is financing to any terrorist activity, a terrorist group or an individual

terrorist;

• That is, for the purposes of this Act, any other transaction or attempt of tran sactiondelineated in the instructions issued by Bangladesh bank from time to time.

Anti-Terrorism Act, 2009 defines suspicious tra nsaction asfollows- 'suspicious transactio n' means such transactions

Which are different from usua l transactions;• Which invoke presumptionthat,

o itis the pr oceeds of an offenc e und er this Act,o it relates to financing of terrorist activities or a terrorist person or entity;

• Which is any oth er transaction or an atte mpt for transactions de lineated in theinstructions issued by the Bangladesh Bank from time to time for the purposes of thisAct.

10.2.2 SUSP ICIOUS TRANSACTION REPORT:

The final output of an AML & CFT compliance program is reporting of suspicious tran saction orreporting of suspicious activity. Suspicious Transaction Report (STR) or Susp icious ActivityReport (SAR) is an excellent tool for mitigating or minimizing the AML&CFT risk for banks.Therefore, it is necessary for the safety and soundness of the hank.

-,

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Usually, STR/SAR means a formatted report of susp icious transactions / activities where thereare reasonable grounds to believe that funds are the proceeds of predicate offence or may belinked to terrori st activity or the transactio ns do not seem to be of usual manne r. Such report isto be submitted by banks to the competent autho rities i.e. to BFlU. Suspicion basically involves apersonal and subjective assessment The branch has to assess whether there are reasonablegrounds to suspe ct that a transaction is related to money laundering offence or a financing ofterrorism offence.

10.2 .3 IDENTIFICATION OF STR/ SARIdentification of STR/SAR may start with identi fying unusual transaction and activity. Suchunusual tra nsactions may be unusual in terms of complexity of tr ansaction, nature oftransaction, volume of transaction, time of transacti on etc. Generally, the detection of somethingunusual may be identified by:

• Comparing the KYC profile, if any inconsistency is found and there is no reasonableexplanation; By monitoring customer transactions;

• Byusing red flag indicator.

Atransaction which appears unusual is not necessarily suspicious. Even customers with a stableand predictable transactions profile will have periodic transactions that are unu sual for them.Many customers will, for perfectly good reasons, have an erratic pattern of. tr ansactions oraccount activity. So the unusual is, in the first instance, only a basis for furth er enquiry, whicbmay in turn require judgment as to whether it is suspicious or not A transactio n or activity maynot be susp icious at the time, but if suspicions are raised later, an obligation to report thenarises. Annexur e-C provides some red flag indicators for identifying STR/SAR related to ML &TF. All suspicions reported to the AMLD shoul d be documented, or recorded electro nically. Therepo rt should include full details of the customer who is the subject of concern and as full astatement as possible of the information giving rises to the suspicion. All internal enquiriesmade in relation to the report should also be documented. This information may be required tosupplement the initia l report or as evidence of good practice and best endeavors if, at somefuture date, there is an investigation and the suspicions are confirmed or disp roved.

The following chart shows'the graphical present ation of identification of STR/SAR-

Iaformntion provid ed in AOFNormal / Comparingf-- Transa ction Profile

ExpectedhIT Profile

Transaction Other relevan t documents

Consistent

tnconslsten

Findings

unusual

Transaction

Normal/

Expected

Tr.msaction

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As discussed above, the identification of STR/SAR may be sourced from unusual transaction oractivity. In case of reporting of STR/SAR, banks should conduct the following 3 stages :

Identi fication:

STR/SAR can be identified by any staff of the Bank. However, frontline staff is more likely toidentify suspicious transaction or activity in the account. This stage is very vita l for STR/SARreporting. For STR/SAR detection, Bank has developed the following reporting tools to monitorcustomer transaction and identify suspicious move ment of transaction in to the account.

1. Daily Excessive Cash movement report ( 7 lac and above)2. TP breach Report3. Monthly CTR report

Evaluation:

This part must be in place at branch level and AMLD. After identification of STR/SAR at branchlevel, BAMLCO should evaluate the transaction/activity to identify susp icion by interviewing thecustomer or thro ugh any other means . If BAMLCO is not satisfied, he should forward the reportto AMLD. After receiving report from branch,AMLD shoul d check the sufficiency of the requireddocuments. Every stages of evaluation (whether reported to BFIU or not), banks should keep

,records with proper manner,

Disclosure:This is the final stage and banks should submit STR/SAR to BFIU if it still looks

suspicious. Asample flowchart:

Nor suspicious ,--- ----,Close: 'li th proper

"'>--- .--;>] recordsFindingsEvaluatebyBA.',[LCO

Detect UllllSU.1 1

trausacriou/activiry

suspicious

Arrange properdccumenrsand .

Sent [0 CCU

Check thesufficiencyof

dOtlllllaIts byceu

I Repoll [0 BFTU I



- SF1U, BS makes further queries on suspicious activity of the customer and AM lD responthem

«Cent ral Compliance Unit investigate the issue and scruti nize the related documents. If f .suspicious, report to BFIU and BS with supporting documents, if not record only

- If BAM l CO find~ the transacti on to be suspicious then fill up the STR. form, att aches t he ~~~}~~~~1_of AOF, respect ive voucher, One year bank stat ement for all t ransact ional account and ~,P,;fl~~!Fffo~

to CAM lCO along with explanat ion f}~4~]tr11f

- SAM l CO assess whether the transaction/account/act ivities are suspicious or not . If BAis

- If any transaction seems to be suspicious and valid reason/evidence/ supporting docunot available against the tran saction, CSM reports the account to BM/ BAM lCO with t h

prescribed forma t .

10.2.4 FEW IMPORTANT NOTES ONSTRjSAR REPORTING:• There is legal obligation und er LAW (Section 25, MLP Act 2012) to disclose suspicious

transactions and you may be personally liable for failur e to report suspicion to relevantauthority.

• Nobody can prevent you from filing a SAR.• You can consult with your line manager but the decision to file a SAR should be yours ,

depending entirely on your suspicion.• Disciplinary action can be taken if an employee willfully fails to report a very obvious

suspicio us activity.• Disciplinary action will be taken against anybody including supervisors if they dissuade or

prevent an employee from filing a SAR.• No action will be taken against a person for filling a SAR even if it later turn ed out to be a

genuine transaction, if the perso n acted in good faith without any mala-fide intent• Do not alert the customer about your suspicion or about filing of the SAR. (Putting hard

holds on accounts can result in a tip-off). Tipping off is a punishab le offence under Law.• Once a SAR is filed, act as per the instructions of the CAM LCO or the authoritie s.• CAMLCO is the only autho rity in the bank who is empowered to take a decision on a SAR,

including external disclosure.

10.3 CASH TRANSACTIONREPORTEvery branch will generate the monthly cash transaction report and send feedback to AMLD indue time. lf the branch has not any such tr ansaction, it should report it to the AMLD as 'There isno reportable CTR'. Simultaneously, branches need to identify whether there is any suspicioustr ansaction while reviewing the cash tran sacti ons. If any suspicious transaction is found, thebranch will submit it as 'Suspicious Transaction Report' to the AMLD. If no such tra nsaction isidentified, it needs to inform to the AMLD as 'No suspic ious transaction has been found' whilereporting the CTR. Besides, every branch needs to preserve its CTR in their own branch.

\Jlun(1s

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BRAe Bank Ltd

ML & TF Risk Manag em ent Guidelines

The AMLD needs to pre pare the accumulated CTR received from its all branches. The AMLDmust ensure the accuracy and timeliness while reporting to BFIU. Moreover, it has to review allthe cash tra nsaction from the branches above the threshold and sear ch for any suspicioustransaction. If any suspicious tran saction is found, the branch will sub mit it as 'SuspiciousTransaction Report' to the BFIU. AMLDhas to inform BFIU thr ough the message boa rd of goAMLweb in case of no transaction is found to be reported as CTR. Moreover, AMLD must ensure thepreservatio n of information related to cash transaction report up to 5 (five) years from themonth of submission to BFJU.

~l3I

I'"I

,I ,\0 10:1 iI·..·I.u...

'{u- _ ir:lmil, " •• :ilu

~""'r"'.. .pn-

ll"r.IJ~1

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"W!tco'9'Ii·rih.... " •• h

' n fi

-, .k>'l"-'_~.v:::t'

.lo!c1'" ~

.." c- ~'....;:,Otit=n ....~..."

..w...lso .. as

_F'_lq"'''Tt.~"'~CO "irio.

duoll".

~ m hr.ft dr.o 'h .

....u a......~

!lcao,."n llO :

era& STR Monttorfhg Process

i"~..IO<:t1II;;,litnl!k l.: lur3r .. ..ri.~ Cr!l.

,.~...e crae'*nt on!o: u.n.>ll

'a,.I.... ' He

..hn:lt..... 11:""ll n

;il.lC.:JIml.

ts

~NqU~a.

w.-"......c ....~ .. i'.s.I:

'-\......-::l"'- ..o!<. .:r. .",h,'~"" "..' ".",.~~

,. ' ..~Oi,

_'~~c!<

...... ,ur. f.1 .iwr..rn.......f_""'..

u-bC'3.:lS ""....,.,- 'QI:.'tntuc l io"

CTR enta ils daily sinole or cum ulative cash transaction above BDT1 million in an account Thereportge nerated on monthly basis.



10.4 SELF ASSESSMENT REPORT

Banking system in Banglades h is mainly based on branch banking. The branch es of the banksar e in every corner of the country and they have an active role in stimulating the economicgrowth of the country. It is very difficult for the AMLD or ICC to scrutinize the activities of everysingle branch and hence there is a risk regarding the operation of the branch es. In order toreduce that risk, BFlU has established a Self-Assessment Repo rting syste m for the branches .According to the instructions of BFlU, branches of bank need to conduct the Self-Assessment toevaluate them on a half yearly basis . Self-Assessment has to be done through a checklist that is



circulated by BFIU circular no. 19, dat ed 17 September, 2017. Before finalizing the evaluationreport, there shall have to be a meeting presided over by the branch manager with all concernedofficials of the branch. In that meeting, there shall be a discussion on tbe branch evaluationreport; if the identified problems according to that report are possible to solve at.the branchlevel, then necessary actions should be taken without any delay to finalize it; and in the finalreport, recommendatio ns shall have to be jotted down. In the subsequent quart erly meetings onpreventing money laundering and terrorist financing, the progress of the related matters shouldbe discussed.After the end of every half year, the branch evaluatio n report along with the meas ures taken bythe branch in this regard and adopted recommendations regarding the issue should besubmitted to the Inte rnal Audit Department or ICCD of the Head Office and the AMLD within the15 th of the next month.

10.4.1 INDEPENDENT TESTINGPROCEDUREThe audit must be indepe ndent (i.e. performed by people not involved with the bank'sAML&CFT compliance). Audit is a kind of assessment of checking of a planned activity.Independent testing has to be done through a checklist that is circulated by BFIUcircular no. 19;dated 17th September, 2017. The individuals conducting the audit shou ld report directly to theboard of directo rs/senior management Audit function shall be done by the inte rnal audit or ICC.At the same time, external auditors could be ap pointed (if possible) to review the adequacy ofthe program.

10.4.2 INTERNAL AUDIT DEPARTMENTS OR ICC's OBLIGATIONS REGARDING SELFASSESSMENT OR INDEPENDENT TESTINGPROCEDUREThe Internal Audit Department shall assess the branch evaluation report received from thebranches and if there is any risky matt er identified in any bra nch, it shall inspect the branchimmedia tely and shall inform the matter to the AMLD.While executing inspection/ audit activities in various branches according to its own regularyearly inspection/ audit schedule, the Internal Audit Department should examine the AML&CFTactivities of the concerned branch using the specified checklists for the Independent Testin gProcedure. The Intern al Audit Department should send a copy of the report with the ratin g ofthe branches inspected/ audited by the Internal Audit Departm ent to the AMLD of the bank

10.4.3 AMLD's OBLIGATIONS REGARDINGSELF ASSESSMENT OR INDEPENDENT TESTINGPROCEDUREBased on _the received branch evaluation reports from the branches and submittedinspection / audit reports by the Internal Audit Department or ICC, the AMLD shall prepare achecklist based evaluation report on the inspected bra nches in a considered half year time. Inthat report, beside other topics, the following topics must be included:(a) Total number ofbranch and number of self-assessment report received from the branches;(b) The number of branches inspected/audited by the Internal Audit Department at the time ofreporting and the status of the branches (branch wise achieved number);(c) Same kinds of irregularities that have been seen in maximum number of branches accordingto the received self-assessment report and meas ures taken by the AMLD to prevent thoseirregularities.(d) The general and special irregulari ties mentioned in the report sub mitted by the InternalAudit Department and the measures taken by the AMLDto prevent those irr egularities; and(e) Measures to improve the ratings byensuring the compliance activities of the branches thatare evaluated as 'unsatisfactory' and 'marginal' in the received

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10.5 OTHER RETU RN SUBM1SSION:

, Parichisto-,-Gha

10.5.1 Retu rn SubmissionProcess

-, _0·


lS lhof the f61lowing .:.-, ',month :: '

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RECRUlTMENT, TRAINING AND AWARENESS

To mitigate the risk of money laundering, terrorist financing and proliferation of weapons ofmass destruction, bank should follow proper Scree ning Mechanism in case of recruitment andensure proper training for their officials.

11.1 EMPLOYEESCREENINGBank is subject to ML & TF risk from its customers as well as from its employee in absence ofproper risk mitigating measures. A fair recruitment process is alrea dy in place and followed byHR.This fair recruitme nt proce dure shall not only include implementation of fairness in judgingpublicly declared competitive recruitment, but also include the judgment of good character. ICCshall examine the recrui tmen t file duri ng HRaudit.HRis advised to follow the following measures (at least one from below):

Appoint a third Party to verify the information (Prese nt Address, Permanent address,Certificate)

• reference check• background check

screening through or clearance from Law EnforcementAgency and sanction screeningPersonal guara ntee .

Before assigning an employee in a particu lar job or desk, HR shall examine the consistency andcapability of the employee and be ensured that the employee shall have necessary traini ng onAML& CFT lessons for the particular job or desk.

11.2 KNOWYOUREMPLOYEE (KYE)Know-your-customer, an essential precaution, must be coupled with know-your-employees.There are a lot of instances that highlight the involvement of employees in fraudulenttransactio ns and in most cases in ass ociation with customers. This therefore brings in sharpfocus the need for thorough checks on employees' credentials and proper screening ofcandidates to preve nt the hiring of undesirables. Policies, procedures, job descriptions, internalcontro ls, approval levels, levels of authority, compliance with personnel laws and regulations,code of conduct/ethics, accountability, dual contro l, and other 'deterrents should be firmly inplace. And the auditor should be conversant with these and other requirements, and see thatthey are constantly and uniformly updated. KYE requirements should be included in the banksHRpolicy.

11.3 EDUCATION AND TRAININGPROGRAMS:An integral element of the fight against money laundering and the financing of terrorism is theawareness of those charged with the responsibility of identifying and analyzing potential illicittransactio ns. Bank should, therefore, establish ongoing employee training progra ms. Trainingshould be targeted at all employees but added emphasis should be placed on the training ofcompliance and audit sta ff because of their critical role in sensitizing the broader staffcomplement to AML/CFT issues and ensuri ng compliance with policy and procedures.

All relevant staff will be educated in the process of "Know Your Customer" requirements formoney laundering prevention and combating terr orist financing purposes. The training in thisrespect would cover not only the need to know the true identity of the customer but also, wherea business relationship is being established, the need to know enough about the type of businessactivities expected in relati on to that customer at the outset to know what might constitutesuspicious activity



at a future date. Relevant staff should be alert of any change in the pattern of a customer 'stra nsactions or circumstances that might constitute criminal activity.

11.3.1 CONTENT AND SCOPE OF THE TRAINING PROGRAM :Every employee of a bank shall have at least ba sic AML & CFT training that should cover all theaspects of AML & CFT measures in Bangladesh . Basic AML & CFT tra ining should be at least daylong model having evaluation module of the trainees . Relevant provis ion of Acts, rules andcirculars, guidelines, re gulatory requirements , susp icious transacti on or activity re portingshould be covered in basic AML & CFT tra ining course.Training should be general as well as specific to the area in which the tr ainees operate. As staffmembers move between jobs, their training needs for AMLjCFT may change. Trainin g programssho uld, inter alia, incorpo rate:a. Relevant money launderi ng and terrorism financin g laws and regulations;b. Definiti ons and examples of terrorist financin g schemes;c. How the institution can be used by laundere rs or terrorists;d. The im porta nce of adhering to customer due diligence policies, the processes for verifying

custo mer iden tification and the circumstances for implementing enhanced due diligenceprocedures;

e. The procedu res to follow for detection of un usua l or susp icious activity across lines ofbusi ness and across the financial grou p;f. The completio n of unusu al and susp icious transaction reports;g. Treatment of incomplete or declin ed transacti ons ; andh.The procedur es to follow when working with law enforce ment or the FlU on an investigation.

11.3.2 New Employees : A gene ral appreciati on of the background to money laundering &terrorist financing, and the subse quen t need for repo rting any susp icious transactions to theAnti-Money Laundering Compliance Officer (AMLCO) should be provided to all new employee swho are likely to be dealing with customers or their tr ansactions, irrespective of the level ofseniority.

11.3.3 Fr ont Line Executives: Officers who are dea ling dir ectly with the public are the firstpoint of contact with potential terrorists and the ir efforts are vit al to the Bank' s strat egy in thefight against money lau nd ering & terrorist financing. They must be made awa re of their legalresponsibilities and should be made aware of the Bank's reporting system for suchtransactions. Training should be pr ovided on facto rs that may give r ise to suspicions and oil th epr ocedures to be adopted wh en a transaction is deemed to be suspicious. All 'front-line' staffwould be made aware of the Bank's policy for dealing with non- re gular (walk in) customersparticularly where large tr ansactions are inv olved, and the need for extra vigilance in thesecases.

11.3.4 Pr ocessi ng (Back Office) Staff: Officers who receive completed Account Opening,Payme nt Orde rjDDjTTj FDRapplication forms and cheques for de posit into customer's accountor other investments wou ld receive the training given to cashiers and other fron t office staff. Inaddition, these officers should be aware that the offer of suspicious fund s or the request toundertake a suspicious transaction may need to be reported to the Anti-Mon ey LaunderingCompli ance Officer (or alte rnatively, a line supe rviso r) wh ether or not the fund s are accepted orthe transactions proceeded with and must know what proc edu re s to follow in thesecircumstances.



11.4 SENIOR MANAGEMENTjOPERATlONSSUPERVISORS:Without proper concern and aware ness of senior management of a bank, it is difficult to haveeffective implementa tion of AML & CFT measures in the bank. AMLD under the supervision ofMD is required to arrange, at least once in a year, an awaren ess program for all the members ofits board of directors or in absence of board of directors, members of the highest policy makingcommittee and people engaged with policy making of the bank.

A higher level of instructio n covering all aspects of money launde ring and te rrorist financingprocedures should be provided to those with the responsibility of supervi sing or managingstaffs. The training will include interna l reporting procedures and the requirements forverification of identity and the retenti on of records as well as the offences and penalties arisingfrom the Act for non-reporting and assisting terrorist 's activities.

11.5 CUSTOMERAWARENESSThe Bank has taken proper actions for broadcasting awareness bu ilding advertisement anddocumentaries regarding prevention of money laundering and terrorist financing throughdifferent mass media unde r Corporate Social Responsibility (CSR) fund.

11. 6 AWARENESS OFMASS PEOPLEPrevention of ML & TF largely depends on awareness at all level. For tbis, BFIU, BB, otherregulators as well as the government sometimes arra nge public awareness programs on AIviL &CFT issues. Banks are encouraged to participate in those initiati ves. It is mandatory for theBranch to display AMLjCFT related Poster in a visible place of the ir premises. Branch shouldalso preserve brochure and distribute the same among the custo mer. Marketi ng departm ent isadvised to arrange public awareness programs like advertisements thro ugh billboard, poster,festoon and mass media, distribution ofhandbills.:leaflet and so on.

11.7 REFRESHER TRAINING:To keep the employees updated about AML & CFT measures, ban ks are required to impartrefreshment training programs of its employees on a regular basis. It is also necessary to keepthe conte nt of training programs under review and to make arrangements for refreshe r trainingat regular intervals t.e, at least once in a year t o ensure that staff does not forget the irresponsibilities.

11.8 JOB SPECIFICTRAINING:Besides basic and 'refreshment AML & CFT training. bank shall arrange job specific training orfocused training i.e., Trade based money laundering tr aining for the trade professionalemployees who deal with foreign or domesti c trade, UNSCR scree ning related trainin g for allemployees who deal with international transactions} customer relations and account opening;credit fraud and ML related tra ining for all the employees who deal with advance and credit ofthe bank; customer due diligence and ongoing monitoring of transaction related tra ining for theemployees who conduct transaction of customers.

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RECORD KEEPI NG

Record keeping is an essential component of the audit trail that the Laws and Regulations se ekto establish in order to ass ist in any financial investi gation and to ensure that crimina l fundswhich are kept out of the financial system, or if not, that th ey may be detected and confiscatedby the authorities .All concerns must retain records concerning custo mer identification and transactions asevidence of the wo rk they have und ertaken in complying with th eir legal and regulatoryob ligations, as well as for use as evidence in any investigation conducted by law enforcement.

12.2 LEGAL OBLIGATIONSObligatio ns under MLPA, 2012 and MLP Rules 2013 and BFIU Circular s:(1) All necessary information/ docum ents of customer's domestic and foreign tra nsa ctio ns has tohe preserved for at least 5(five) yea rs afte r closing the account.(2) All information and documents collected during CDD procedure along wit h KYC, accountrelat ed documents, bu siness correspondence and any report prepared on a customer has to bepreserved for at least 5(five) years afte r closing the account.(3) All necessary information / documen ts of a walk-in Customer's transactions have to be

preserved for at least 5 (five) years from the date of transa ction.(4) Preserved information has to be su fficie nt for presenting as a documentary proof for thejudiciary process of the offence.(5) Bank sho uld provide all information and documents collected during CDD alon g with KYCproc edure and information and documents of transactions as pe r the instruction or demand byBFIU_

12.3 RECORDS TO BE KEPTThe precise nature of the record s requ ired is not specified in the legal and regulatory regime.The objective is to ensure that we can meet the obligations and that, in so far as is practicabl e, inany subsequent investi gation we can provide the autho rities with its sec tio n of the audit tr ail.The firm' s record s sho uld cover:

Customer information transactions• Internal and external suspicion report/reports fro m AMLD/CAMLCO• Training and compliance monitoring information about the effective ness of training

12.4 CUSTOMER INFORMATIONIn re lation to th e evidence of a customer's identity, banks must keep a copy of or the refer encesto , the evidence of the customer's identity obta ined during the applicatio n of CDD measures.Where a bank has received a confirmation of identity certi ficat e, th is certifi cat e will in practicebe the evidence of identity that must be kept. A bank may often hold add itio nal information inrespect of a customer obtaine d for the purposes of enhanced custo mer due diligenc e or ongoingmon itoring. Records of identification evidence must be kept for a period of at least five yearsafter the relati onship with the customer has ended. The date wh en the re lationship with thecustomer ends is th e date: an occasional transaction, or the last in a se ries of link edtr ans actions, is carried out; or the business relati onship ended, i.e. the closing of the account oracco unts.



12.5 TRANSACTIONSAll tr ansactions carried out on behalf of or with a customer in the course of relevant businessmust be recorded within the bank's records. Transaction records in support of entries in theaccounts , in whatever form they are used, e.g. credit/debit slips; cheques should be maintainedin a form from which a satisfactory audit trail may be compiled where necessary, and which mayestablish a financial profile of any suspect account or customer. Records of all tra nsactionsrelating to a custo mer must be retained for a period of five years from the date on which thetransaction is completed

12.6 INTERNALAND EXTERNALREPORTSAbank should make and retain :

• Records of actions take n under the internal and externa l reportin g requirements; andwhen the nominated officer has considered information or other material concerningpossible money laundering but has not made a repo rt to BFlU, a record of the othermaterial that was considered.

In addition, copies of any STRs made to the BFlU should be reta ined for five years. Records of allinternal and external reports should be retained for five years from the date the report wasmade.

12.7 OTHER MEASURESHRrecords should include:lal In relation to training:

I:!. Dates of AML train inggiven;

12: the nature of the training;r;'! The names of the staff who received training;~ Training materialI:!. The results of the tests undertaken by staff, where appropriate.

(b) In relation to compliance monitoring:12: Reports by the CAMLCO to senior management; and~ Records of consideration of those reports and of any action taken as aconsequence.

12.8 FORMATS AND RETRIEVAL OFRECORDSTo satisfy the requir ements of the law and to meet the purpose of record keeping. it isimportant that records are capable of retrieva l without undue delay. It is not necessary to retainall the documents relatin g to customer identity and tra nsaction physically at the premises of thebranch of a bank, provided that they have reliable procedures for keeping the hard copy at acentra l archive, holding records in electronic form and that can be rep roduced and recollectedwithout undue delay. It is not always necessary to retain documents in their original hard copyform, provided that the bank has reliable procedures for keep ing records in electronic form, asappropriate, and that these can be reproduced without undue delay. In addition, a bank mayrely on the records of a third party, such as a bank or clearing house in respect of details ofpayments made by customers. However, the primary requirement is on the bank itself and therespons ibility is thus on the ban k 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 requir ements are the same regardless of the format in which they are keptor whether the tran saction was undertaken by paper or electronic means. Documents heldcentra lly must be capable of distinguishing between the transactions relating to differen tcustomers and of identifying where the transaction took place and in what form.

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TERRORIST F1NAN C1NG & PROLlFERATION F1NAN ClN G'

13.1 INTRODUCT10 NIn line with rising awareness in the world economy, Bangladesh has also enacte d a separate law,the Anti-Terrorism Act, 2009 (amended in 2013) for prevention of terrorism and effectivepunishment of certain terr orist acts and matters connected the rewith . Accor dingly financing ofterrorism has been crim inalized unde r thi s law. It is unde rstood that Bangladesh had deliberatelyincluded provisions for countering terrorist financing into the Anti-Terrorism Act, 2009 insteadof Anti Money Launderi ng Act 2009. This act sets out the expectations of the Bank and theAuth ority in re lation to the minimum sta ndards for combating of the financing of terr orism (CFT)practices by all Financial Institu tions.Bangladesh has criminalized terro rist fina ncing in line with the International Convention for theSuppression of the Financing of Terrorism (1999) . Section 16 of Anti-Terrorism Rules, 2013states the responsibilities of the reporting agencies regarding funds, finan cial assets oreconomic resources or related services held in or through them.

A bank like us that carries out a transaction, knowing that the funds or pro perty involved areowne d or contro lled by terrorists or terrorist organizations , or that the transaction is linked to,or likely to be used in, terrorist activity, is committing a criminal offence under the laws ofBangladesh. Such an offence may exist regardless of whether the assets involved in thetransaction were the proceeds of criminal activity or were derived from lawful activity butintended for use in support of terro rism. This risk is even more serious if the perso n or entityinvolved is later shown to have benefited from the la ck of effective monitoring or willfulblindness of a partic ular bank and thus was to carry out terrorist acts.

13.2 LEGAL OBLlGATlONS & BF1U Circular

All relevant concerned shall take necessary meas ures, with appropriate cautio n andresponsibility,

• To prevent an d identify financiai transactions through which it is connected to anyoffence

• If any suspicious tra nsaction is identified, the bank shall spontaneously report it toBangladesh Bank witho ut any delay.

• The Board of Directors, shall approve and issue directions regar ding the duties of itsofficers, and shall ascertain whether the directions issued by Bangladesh Bank undersection is of ATA, 2009; which are applicable to the bank, have been complied with ornot

• Before any international business transaction, every hank will review the transaction toidentify whether the concerned parties of that transactions are individual or entity ofthe listed individual or entity of any resolution of United Natio n Security Council orlisted or proscribed by Bangladesh government Immediately after the identification ofany account of any listed ind ividual or entity concerned bank will stop that transactionand inform BFIU the detail informatio n at the following workin g day.


13.3 NECESSITYOF FUNDS BYTERRORlSTTerrorist organizati ons nee d money to operate. Weapons and ammunitio n are expensive. Majorinternational operations require substa ntial investm en ts for personnel. training, travel andlogistics. Organizations must have substantial fundra ising operations, as well as mechanisms formoving funds to the organization and iater to terrorist operators. These functions entailconsiderable risk of detection by auth oriti es, but also pose major challenges to both theterrorists and intelli gence agencies .

ML & TF Risk Managemen t Guideiines

13.4 SOURCES OF TERR ORlST FINANCING:There are two primary sources of financing for terrorist activities. The first involves gettingfinancial support from countries, organizations or individuals and the other one involvesrevenue-generating activities, which may be linked to legal or criminal fronts. These areexplained below.

13.4 .1 FlNANClAL SUPPORT:Terrorism could be spo nsored by a country or government, although this is believed to havedeclined in recent years. State support may be replaced by suppo rt from other sources, such asindividuals with sufficient financial means.

13.4.2 REVENUE-GENERATING ACTIVlTIES,The revenue-generating activities of terr orist groups may include criminal acts, and thereforemay appear similar to other criminal organizations. Kidnapping and extortio n can serve a dualpurpose of providing needed financial resou rces while furthering the main terrorist objective ofintimidating the tar get population . In addition, terrorist groups may use smuggling, fraud, theft,robbe ry, and narcotics trafficking to generate funds.Financing for terrorist groups may also include legitimately earned income, which mightinclude collection of membe rship dues and subscriptions, sale of publications, speaking tours,cultural and social events, as well as solicitation and appeals within the comrr.unity. This fundrising might be in the name of organ izations with charitable or relief status, so that donors areled to believe they are giving to a legitimate good cause.Only a few non-profit organizations or supposedly charitable organizations have beenimplicated in terrorist financing netwo rks in the past, worldwide. In these cases, theorganizations may in fact have carr ied out some of the charitab le 'or relief work. Members ordonors may have had no idea that a portion of funds raised by the charity was being divert ed toterrorist activities. This type of "legitimately earned" financing might also include donations byterrorist group members of a portion of their personal earnings.

In general, terrorist organizations may raise funds through: legitimate sources, includingthrough abuse of charitab le entities or legitimate businesses and self-financing, criminalactivity, state spo nsors and activities in failed sta tes and other safe havens.

13.5 MOVEMENT OF TERRORlSTFUNDThere are three main methods to move money or transfer value. These are : the use of thefinancial syste m, the physical movement of money (for example, through the use of cashcouriers) and the international trade system.

Often, terrorist organizations will abuse alternative remitta nce syste ms (ARS), charities, orother captive entities to disguise their use of these three methods to tra nsfer value. Terror istorganizations use all three methods to maintain ongoing operation of the terrorist organizationand undertake specific terro rist activities.

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III



13.5.1 FORMAL FINANCIAL SECTORFinancial institutions and other regulated financial service providers' services and productsavailable through the formal financial sector serve as vehicles for moving funds that supportterrorist organiz ations and fund acts of terrorism . The speed and ease with wh ich funds can hemoved within the inte rnational financial system allow terrorists to move funds efficiently andeffectively and often without detection between and with in jurisdictio ns.Combined with othe r mechanisms such as offshore corpo rate entities, fonnal financialinstitutions can provide terrorists with the cover they need to conduct tr ansactions and launderproceeds of crime when such activity goes undetected.

13.5.2 TRADESECTORThe intern ational trade syste m is subject to a wide ran ge of risks and vulnerabilities whichprovide terrorist organizations the opportu nity to transfer value and goods through seeminglylegitimate trade flows. To exploit the trade system for terrorist financing purposes could assistin the development of measures to identify and combat such activity.

13.5.3 CASH COURIERSThe phys ical movement of cash is one way terrorists can move funds without encountering theAML/ CFT safeguards established in financial institutions. It has been suggest ed that somegroups have converted cash into high-value and hard-to-tra ce commodities such as gold orprecious stones in order to move assets outside of the financial system. The movement of cashacross th e borders is prevalent in the cash bas ed economy and where the electronic bankingsystem remains embryo nic or is little used by the populace.Moving money using cash couriers may be expe nsive relative to wire tr ansfers. As legitimat efinancial institutions tighten their due diligence practices, it has become an attractive method oftransferring funds without leaving an audit trail. When cross border remittance of cash isinterdicted, the origin and the end use of cash can be unclear . Cash raised and moved forterrorist purposes can be at ~ery low levels - making detection and interdiction difficult. .

13.5.4 USE OFALTERNATIVE REMITTANCE SYSTEMS (ARS )Alte rna tive remittance systems (ARS) are used by terrori st organizations for convenience andaccess. ARS have the additional attraction of weaker and/ or less opaque record-keeping and inmany locations may be subject to genera lly less stringent regulatory oversight. Although FATFstandards call for significantly strengthened controls over such service providers, the level ofanonymity and the rap idity that such systems offer have served to make them a favoredmechanism forterrorists.

13.5 .5 USE OF CHARITIESANDNON·PROFIT ORGANISATIONSChari ties are attractive to terrorist networks as a means to move funds. Many thousands oflegitimate charitable organization s exist all over the world that serve the interests of allsocieties, and often transmit funds to and from highly distressed parts of the globe. Terroristswhoabuse the charitable sector have included using legitimate transactions to disguise terrorist.cash trav elling to the same destination; and broad exploitation of the charita ble sector bycharities affiliated with terrorist organizations. The sheer volume of funds and other asse ts heidby the charitable sector means that the divers ion of even a very small percentage of these fundsto support terrorism constitu tes a grave problem.

13.6 PROLIFERATION FINANCING:Proliferation financing is the act of providin g funds or financial services which are used, inwhole or in part, for the manufacture, acquisition, possession, development, export,transshipment, broke ring, tra nsport, transfe r, stockpiling or use of nuclear, chemical orbiological weapons and their means of delivery and rela ted materials, in contravention ofnational laws or, where applicable, international obligations.



13.6.1. SIGN1FICANCE OFPREVENT10 NAND DETECTlON OF PROLlFERAT10N AND ITSF1NANC1NG

Proliferation financing facilitates the movement and development of proliferation-sensitivegoods. The movement and developm ent of such items can contribute to global instabilityand may ultimately result in a loss of life, if proliferation-sensitive items are deployed.

13.6.2HOW CAN PROLlFERiI.TION AND ITS F1NANC1NG BETARGETED?

There are two recognized mechanisms by which proliferation can be tar geted; namelyexport contro ls and financial measures.

- Export Controls:

Proliferators act globally, masking their acquisitions as legitimate trade . Proliferations areknown to exploit global commerce, for example:

• Operating in countries with weak export controls;• Utilizing free-trade zones whe re the obta ining and/or shipping of such goods are more

likely to escape scrutiny; and• Operating in countries with high volumes of international trade.

- Financial Measu r es

Financial measures act as a supplement to effective export controls, to address the financialactivity associated with proliferation. Similar to international criminal netwo rks, proliferationnetw orks use the international financial syste m to carry out transactio ns and business deals.Bank sha ll be alert to the possibility that the cust omers may be engaged or facilitating.proliferatio n activities.

There are thr ee areas whe re bank has responsibilities in relation to proliferation financing.namely:

The risk assessment of customers and products;• Enhanced due diligence on high-risk transitio ns and entities; and• Special attention to trade finance.

13.6.3 EDD ON HlGHER-RlSK TRANSACTlONS AND ENTlT lES

• Bank shall apply, on a risk-sensitive basis, enhanced customer due diligence measuresin any situatio n which by nature can present a higher risk of moneylaunderin g.


ML & TF Risk M anagem ent Guidelines

Enhanced due diligence measures shall be app lied.• Lists complied by national authorities can be a useful resource, as they provide

information on individuals who may pose a proliferation concern. In individual caseswhere proliferation financing is a risk or concern, instituti on may wish to conside rwhether issuing banks, applicants or beneficiaries of lett ers of credit, or freightcompanies and shipping lines moving the goods, appear on such lists.Provide services to a trading company or any vehicle that itself has links to higher riskcountries, from a proliferation perspective, development of a strategy will assist inresponding to any proliferation risks. Such a strategy may call for systems to be put inplace to monitor trading activities.

13.6.4 VERIFICATION OF GOODS

Identifying whether a parti cular good is a dual -use good or otherwise a proliferationconcern , is acknowledged to be difficult. Thus, in higher risk scenario wher e the custom eris importing or exporting goods, bank shall be alert to the need to mitigate againstinadvertent proliferatio n financing. This can be achieved by asking the customer for thefollowing:

• Valid export licenses; or• License not required letters tha t are less than thr ee months old.

Jf a customer is unable to provide the information referred to above, then an alternative is toask that the customer provide evidence, by reference to export control requirements in there levant jurisd iction, that the goods being exported do not require a license.

13.6.5 SPECIAL ATTEN TIO N FOR TRADE FINANCE PROD UCTS

A fairly significant pr oporti on of proliferation activities may use in trade finance as a vehicle.Special attention shall be given to certa in trade finan ce, for example:

• Direct loans or general credit facility to facilitate exporttransactions;• Purchase of promissory notes or bills of exchange issues by foreign buyers to

exporters for the purchase of goods and services, free ing up cash for the exporter;• Factoring- the purchase or discounting of a foreign account receivable for cash at a

discount from face value;• Provision of guarantees to or by financial institutions on behalf of exporters such as

pre- shipment guarantees and performance guarantees; or• Provision of insurance against certain risks in the tradingprocess .

13.6.6 RED FLAG INDICAT ORS



Customer

o The customer is involved in the supply, sale, delivery or purchase of dual-use,proliferation- sens itive or military goods, parti cularly to higher rick jurisdictions.

o The custome r or counter-party, or its addr ess, is the same or similar to one of theparties found on publicly availahle lists .

o The customer is a military or research body connected with a higher riskjurisdictio n of proliferation concern.

o Customer activity does not match the business profile.o Customer is vague, particularly about end user and end use, provides

incomplete inform ation or is resistant to providing additional informatio nwhen sought

o A new customer requests a letter of cre dit from bank, whilst still awaiting approvalof its account.

o Complicate d structures to conceal involvement-use of laye red letters of credit,front compa nies, intermediaries and brokers.

Transa ctions IOr ders

o The transactio n concerns dual-use, pr oliferation-sensitive or military goods,whether licensable or not.

o The transaction involves an individual or entity in a foreign country of proliferationconcern.

o Transaction demonstrates a link betw een representatives of companies exchanging goodse.g. same owners or management, in order to evade scrutiny of the goods exchanged.

o Transaction involves the shipment of goods inconsistent with normal geogra phictrade patterns i.e, whe re the country involved does not normally export or importthe types of goods concerne d.

o Order for goods is placed by firms or individuals from for eign countries, otherthan the country of the stated end-user.

Jurisdiction

o Countries with weak financial safeguard and which are active ly engaged with asanctio ned country.

o A presence of an industry that produces dual-use goods, proliferation-sensitiveitems or military goods.

o Deliberate insertion of extra links int o the supply chain e.g. diverting shipme ntsthrough a third country.

o Final des tinatio n or end-use unclear.o Project financing and complex loans, where there is a pr esence of other objective

factors such as an identified end-user.o Declared value of shipment under-valued in relation to shipping cost.o Inconsistencies in information contained in trade documents and financial flow e.g,

nam es, addresses, final destination.o Use of fra udulent documents and identiti es e.g. false end-use certificates and forged

export or re-expor t certificates.o Use of facilitato rs to ensure the transfer of goods avoids inspection.



o Innocuous commercial wording on customs declaration/export license e.g, pump(witho ut furth er explanation of purpose/use).

a Afreight forwarding finn being listed as the product's final destination.a Wire instructions or payment from or due to entities not identified on the original

letter of credit or other documentation.o Pattern of wire transfer activity that shows unusual patterns or has no apparent purpose.

13.7 TARGETED FINANClALSANCTlONSIn recent years, the concept and strategy of targeted sanctions imposed by the United NationsSecurity Council under Chapte r VB of the Chart er of the United Nations, have been receivingincreased attention. Most of the countries agree that better targeting of such measures on theindividuals responsible for the policies condem ned by the international community, and theelites who benefit from and support them, would increase the effectiveness of sanctions, whileminimizing the negative impact on the civilian population . The considerable interest in thedevelopment of targeted sancti ons regimes has focused primarily on financial sancti ons, traveland aviation bans, and embargoes on specific commodities such as arms ordiamonds.Targeted financial sanctions enta il the use of financial instrume nts and institutions to applycoercive pressure on transgressing parties-senior offici als, elites who support them, ormembers of non- governmental entities - in an effort to change or restri ct their behavior.Sanctions are targeted in the sense that they appl y only to a subset of the population-usuallythe leadership, respo nsible elites, or operationally responsib le individuals ; they are financial inthat they involve the use of financial instruments, such as asset freezing, blocking of financialtransactions, or financial services; and they are sanctions in that they are coercive measuresapplied to effect change or constrain action.Howeve r, targeted financial sanctions represent a potential refinement of the san ctions tool thatcould be used in conjunction with other coercive efforts, such as travel bans, to minimize theunintended effects of comprehensive sanctions and achieve greater effectiveness.To implement TFS in Bangladesh, the Govern ment has issued Statutory Regulatory Order (SRO)under section 2 of the United Nations (Secur ity Council) Act, 1948 (29 November, 2012) andamended the SRO to make it more comprehensive (June, 2013). To make the processenforceable, a separa te section has been included in ATA, 2009 through ame ndment of ATA in2013. Section 20(A) of ATA, 2009 covers all the requirements under UNSCR's tool were takenand will be taken under chapter VB of the charter of UN. Before that BFIU used to issue circularlett ers for repo rting organizations to implement UNSCR resolutions.For effective implementa tion of these provisions, detail ed mechanism has been developed inAnti- terrorism Rules, 2013. Under rule 16 of AT rules, 2013, banks as a reporting agency haveto maintain and update the listed individuals and entities in electro nic form and regularly run a 'check at the webs ite of United Nations for updated list In case there is any fund or economicreso urces held by the listed individuals and entities, the banks should immediately stoppayment or tran saction of funds, financial assets or economic resources and report to the BFIUwithin the next working day with full particulars of the listed and/or the suspected individualsor entities or related or connecte d individual iden tities.

13.7.1 UNSCRESOLUTIONS

The following resolutions adop ted by the UN Security Council under Chapter VlI are relevant forthe purposes of the guideline:

Resolutions 1267 (1999), 1333 (2000 ), 1363 (2001), 1373 (2001), 1390 (2002) , 1452 (2002),1455 (2003), 1540 (2004), 1526 (2004), 1617 (2005), 1718 (2006), 1730 (2006) , 1735 (2006),1737 (2006),



1747 (2007), 1803 (2008),1822 (2008), 1874 (2009), 1904 (2009), 1929 (2010), 1988 (2011),1989 (2011), 2082 (2012), 2083 (2012).

Operative elements of the TFS

1. Resolutions relating to the Al-Qaida sanctions under UNSCRs 1267/ 1999 and successor sto 1267;

2. Resolutio ns relatin g to the Taliban sanctio ns under UNSCR 1988 and current andsuccesso r resolutions to resolution 1988 (2011);

3. Resolution 1373 (2001); and4. Resolutions concerning weapons of mass destruction and sanctions imposed upon the

Democratic People's Republic of Korea (North Korea).

13 .7.2 LOCALSANCTIONS/BAJ'lNED LISTS

The political division of the Home Ministry of Banglades h on April 2009 blacklisted 12organizations. The organizatio ns are Harkat-ul Jihad Islami (HuJI) Bangladesh, jamaat-ulMujahideen Bangladesh (JMB), jagrata Muslim janata Bangladesh (JM)B), Shahadat-e-al Haqima(SAH), Hizbut Touhid, Islami Samaj, Ulerna Anjuman al Balyinaat, Hizb-ut Tahrir, islamicDemocratic Party, Touhid Trust, Tamir ud- Deen, Alla' r Dal. Of th ese 12 groups, four includin gHUll, SAH, ]M]B and JM Bwere previously banned,

13.7.3 WHAT, WHY, WHO AND WHEN SCREENING IS REQUlRED?

• Sanctions, PEPs an? 'Bad Guys', Internal/local BannedLists• AML, Terrorist Fina ncing, Proceeds ofCrime

• Customers, Prospects, Vendors, Beneficia ries , Employees

• Custome r On-hoarding,Ongoin g,Transaction (local/international) Screening

13 .8 SANCTlON SCREENING MECHANISMAT BRACBANK

SANCTION list screening is not only a regulatory requirement hut also required by SRO(Statutory Regulatory Order) and laws (Anti -Terrorism Act 2009, amended in 2013).

Therefore, all concerned are advised to screen accounts against UN/OFACjEU/French /LocalList Sancti on before account opening and for all cross border transacti ons includin g trade andremittance. Banks have already developed a SANCTION scre ening tool integrated with DE DUPEsearch engine as we ll as mRemit.

The Screening is integrated with our multipie in-ho use systems like DEDUPE, mRemit &

Spotlight as well as in Finacle. Followi ng are the key features of screening:

o Real Tj me SYnchr oniza ti on of Sanction List:

Office of Foreign Assets Control (OFAC), a wing of US Treasury Department is maintaining theupdated list of United Nati on Sanctions and one of the important features of this developedpro ject

BRAe BankLtd Page 88 of 123


is to synchr onize that list on daily basis automatically with OFAC site. So that we can check ouraccounts or transactions with any matched items from OFAC list.

o Imulementa ti on of Sound like and Score based Searchin" wjth Pri nt option;

To make the searching easier, here two advance search algorithms have been used. Now, namesthat are similar to pronounce can be det ected with any spelling and searching can be done basedon the given matching percentage. Every search output can be printed from user end forsubsequent attachment of that printed copy with the AO F.

o Periodic Searchin'i of Entire Cust omer Base of the Bank with UN Sanctions;

This advance feature will periodically check Bank's existing Customer base with theupdated Sanctions maintained by the Bank and report the suspicious individuals as well asorganizations.

o Real Time Screen ing of Remittance Transactions

1. Exchange house that used to share excel file to the Bank to remit the beneficiaries, thosebene ficiaries will be screened before paying the remittances through this pro ject.

2. Exchange House that have direct credit arrangement with the bank, can direct ly credit tothe beneficiaries and here, as the beneficiaries are our existing customers and we alreadyperformed the screening of those customers while opening the account and all of the m aregetting checked periodically, this project will generate report at day end if any beneficiary foundmatching very closely with anyone of the sanctio ns.

3. A user interface has been developed to identify suspicious beneficiaries before performingremittance tra nsactions anywhere through exchange house like Western Union.

o Real Time Screen ing of Trade Transact ions;

Through this mechanism every trade transaction will be under scree ning before flowing intothe SWIFT queue.

o Incorp orati on ofL ocal. French & EUsanctions;

Sanctions imposed by both Bangladesh and French Governm ent on different individualorganizations will be also under screening of this project. Besides, latest list of European Union(EU) has also been incorporated.

SANCTION Screening Manuals:

All manuals are attached with this guideline


13.9 ROLE OF BRAC BANK INPREVENTING TF & PF!:;'l BRAC Bank has issued Policy & pr ocedure approved by the approval of Board of

Directors for detection and prevention of financing of terrorism and financing inproliferation of weapons of mass destruction, issued various instructions about theduties of Bank officials.


!=.': Al l concerne d of the Bank are advised to take necessary measures with appropriatecautio n and responsibility, to prevent and identify financial transactions which areconnected to any offence under ATA, 2009 and if any suspicious transaction is identified,the concerned shall spontan eously report it to AMLD without anydelay.

t:!: If any news of activities of financing of terrorism and financing of proliferation ofweapo ns of mass destruction are publishe d in any mass media, AMLD shall send thedetails of the accounts (if any is found with them) of any perso ns who are engaged inthose activities to BFIU immediate ly.

~ BBL has developed a search engine to maintain and upda te the listed individuals andentities in electr onic form and regularly run a check at the website of United Nations forupdated list. Bank run regular cbecks on the given parameters, including transactionalreview, to verify whether individuals or entiti es listed by the respective UNSCRCommittee are holding any funds, finandal assets or economic resources or relatedservices or having any form of relationship with them.

~ The bank has developed tools to check on the given par ameters, including transactionalreview, to verify whether individuals or entities listed or scheduled under the ATA,2009; individuals or entities owned or contro lled directly or indirectly by such personsor entities, as well as persons and entities acting on behalf of, or at the direction of,individuals or entities listed or scheduled unde r the Act are holding any funds, financialassets or economic resources or relatedservices or having any form of relationship withthe bank.

CONCLUSIONBRAC Bank must comply with the requirement of this guideline for combating moneylaundering and terrorist financing. Where there is any confusion or any contradiction arisesfrom this guideline, it should be referred to CAMLCO or DCAMLCO for furthe r guidance.CAMLCOis the autho rity to explain sense and sentiment of the policy and can impose a toughercontrol mechanism or instructions not mentioned in this guideline on AML/CFT ground. In thatcase, he has to take advice from Managing Director and CEO of the Bank.


M L & TF Risk Management Guidelines '

Annexure-A

RlSKREGISTER

aj Business rusk:Business risk is the risk that the business may be used for Money Laundering (ML) & TerroristFinancing (TF). Following are some examples of ML & TF risk the bank faces and the possib leways to reduce and manage those risks

1 Customerrusk I Lik elih ood I Impact rusk

ITreatment /Mitigation strategy

Score

Retail (Easy and Excel Customer)

New customer Likely Moderate Medium aj Obtain full and accurate information.b) Verify the informationc) Screen the account against

UNSCR sanction and OFAC list beforeopening.

dj Obtain required documentsej Conduct KYC with ap propriate

risk grad ing.f) Perform Customer Due Dili gence (CDD)

Walk-in customer Unlikely Minor Low a) Obtain purpose of transactionb) Obtain relevant docume nts like NlD

and source of fundc) Complete short KYC and perform CDD

A new cust omer Likely Moderate Medium aj Analyze the circumstances und erwho wants to carry which cust omer wants to carry out theout a large transaction.transaction b) Collect documentary evidence in

support of Source of fundc) Ensure th at the transaction

commensurate withprofession / source of income

d) Ensure that complete KYC is in placeej Where required, attain information of

ben eficial ownerf) Perform Enhanced Due Diligence (EDD)

A customer or a Very Likely Moderate High aj Identify the list of accounts involvedgroup of customers with the transactions.making lots of bj Analyze th e transactions in terms oftransactions to the origination and destination of thesame individual o r transaction.group c) Check decl ared TP with actual

transactionsd) Monitorin g the transactions exceeding

the limits declare d in their TPs. thosetaking place at different regions of thecountry

ej Obtain justification from the customerf) Conduct Enhanced Due Diligenceg) In case of no n-cooperation from

custo mer end, close the accounts orraise STR.



A customer whose Likely Moderate Medium aj Apply Customer Due Diligenceidentification is b) Conduct comp lete KYCdifficult to check c} Obtain information of beneficial owner

Customers that are Likely Major High aj Ensure purpose of account openingpoli tically exposed b) Conduct Enhanced Due Diligencepersons (PEPs) c) Obtain approval fromor influen tial senior managementperso ns (lPs) or d) Get addi tional information ashead of per app roving authority,international e) Grade the account in high risk categoryorganizations andtheir familymembers and closeassociates

Customer opens Likely Major High aj Identifying beneficial owners of theaccoun t in the accounts and obtaining theirname of his/her complete informationfamily member bj Monitoring the transactionswho intends to exceeding the limits declared incredit large amount theirTPsof deposits not c) Condu ct Enha nced Due Diligenceconsistent with the d} Wher e above are not possibl e,known sources of decline the transactio nlegitim ate familyincome.

Retail (Sup r em e and Priority)

A new customer Likely Moderate Medium aj Obtain documents of Source of fundwho wants to carry b} Crosscheck the income with occupationout a large and nature of businesstransaction. c} Maintain proper TP

d} Conduct complete KYCe} Apply Customer Due Diligence

Custome rs that are Likely Moderate Medium a} Conduct complete KYCpolitically exposed bj Perform EDDpersons (PEPs) c) Obta in ap proval fromor influential senior managementpersons (IPs) or d ) Obtain informa tion of ben eficial ownerhead of e) Search in media for any adverse newsinternationalorganizations andtheir familymembers and closeassociates

Customer opens Unlikely High Medium a} Obtaindocuments of Source offundaccount in the b} Crosscheck the income with occupationname of his/her and nature ofbusinessfamily membe r c} Conduct compl ete KYCwho intends to d} Maintain proper TPcredit large ej Apply Customer Due Diligenceamount of


, ML & TFRisk Management Guidelines

deposits notconsiste nt with theknown sources oflegitimate familyincome.

Small Medium Enterprise

Customers with Very Moderate High a) Monitorin g of transaction and checkcomplex Likely whether it commensu r ate with sourceaccounting and of fundhuge transaction b) Conduct Enhanced Due Diligence (EDD)

Receipt of donor Likely Major High aj Identify the so urce of fundfund, fund from with supporting docum entforeign sou rce b) Cond uct Enhanced Due Diligence (EDD)Customer which Unlikely Major Medium a) Complete KYC of the customerare reporting b) Obtain declaration whether theorganization under custo mer follows MLP Act 2012 as aMLP Act 2012 no t reporting organizationcomplying with thereportingrequirements

Wholes ale Banking Division

Anew customer Very Moderate High a) Obtai n documents regard ing source ofwho wants to carry Likely fund.out a large bj Check whether TP of the customertransaction. commensurate with the income and

occupation; identify natur e of busines sand tra nsaction patt erns.

c) Complete ba nk's prescribed KYC formd) Cash flow statement

(audited/unaudite d)e) Physical visit of client office premises.f) Check sales regist er against depositg) Prev ious bank statementh) Apply Enhanced Due Diligence.

A custo mer or a Very Moderate High aj Generate report from system andgroup of custo mers Likely review transactions pattern.making lots of b) Confirm the purpose of transacti ontransactions to the cj In Cash Management business}same individual or transaction within the group isgroup (wholesale). poss ible; however, it is governed by the

cash management agreement andregular monitoring is conducted.

d) Cond uct Enhanced Due Diligence

A customer whose Unlikely Minor Low aj RM does not open account withoutidentification is proper verificatio n of identification .difficult to check. b) . Physically visit the client pre mises and

develop call reportcj Obtain information ab out the customer

fr nmA non-resident Unlikely Major Medium aj Perform EDDcustomer b) Obtain information ab out the customer

from market

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" Dha'f.a •

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c) Advance allowed consideringthe catego ry.

Customers that are Likely Major High a) Obtain documents regarding so urce ofPolitica lly Exposed fund.Persons (PEPs) or bj Check whether TP of customerInfluential Persons commensurate with the income and(IPs) or hea d of occupation; ide ntify natu re of bus inessInternational and transaction patternsOrganizations and c) Perform EDDtheir family dj Fore ign Exchange Regulation Act 1947members and close and policy of BB in this regard areassociates followed for PEPs

e) Obta in sen ior management approvalbefore ope ning the account

Customer ope ns Unlikely Major Medium a) Identify beneficial cwner of the accountaccount in the bj Perform COOfor beneficia l ownername of hisfh er cj KYC . of beneficial owner willfamily member be completed.who intends tocredit large amountof deposits notconsistent with theknown sources oflegitimate familyincome.

Credit CardNew Credit Car d Very Minor Medium aj Obta in full and accurate informationcustome r Likely bj Collect all credit card docs as 'Per PPG.

cj UNSCR sanction and OFAC list checkdj DEOUPEchecke) Collect & Check cmreport.f) Address & contac t number verifica tion

through CPV.g) Complete KYC and COD

Custome r who Likely Moderate Medium a) Address & contact number veri ficationchanges static data throu gh CPV.frequently b) Obtain documents in supp ort of

changed informationc) Customer acknowledgement obtain by

sending letter to old and new addressdj Conduct Enhanced Due Diligence

Customer doing Very Moderate High aj Match Transaction withfrequ ent Likely custom er's incometransaction & b) Provide restrictio n on numberpayment through and amount of transactioncard (Pre paid & c) Apply enhanced due diligence.Credit card)

Customer doing Very Major Extreme aj SMS sent to customer mobile numberhigh volume Likely b) Communicate with Customer to

verify the tra nsact ion.



transaction c) Confirm purpose of transaction(merchant d) Condu ct Enhanced Due Diligencepoint)

Trade & RemittanceWalk in Likely Moderate Medium a) Screening against UNSCR/OFAClistcustomer

withoutNID b) EDD and obta in other BB prescribed ID

(WU& othe rs)c) confirm cell phone number

A new customer Very Moderate High a) Screening against UNSCR/ OFAC list(Import/ Export) Likely b) ConductED D

c] Old customer of other bank:obtain certi ficate from previous bank on " noove rdue or outstanding bill of entry"d) New Customer:Confirm that all re levant documentsincluding IRC/E RC ar e in place

A new custo mer Likely Moderate Medium a) CDD of the customer(Outward b) Sanction screeningremittance-through c) Ensure the purpose of the remittanceSWIFT) with supporting documents

A new customer Very Minor Medium a) CDD of the beneficiary(Inwar d Likely b) Sanction screeningremittance- c) Ensur e the purpose of the remittanceth rough SWIFT) with supporting documents

d) Obtain Cform wh er e ap plicab le

A new custo mer Likely Moderate Medium a) Screening agains t UNSCR/OFAC listwho wants to carry b) ConductCDDouta large c) Old customer of othe r bank:transaction obta in certificate from previous bank on " no(Import/ Export) overdue or outstanding bill of entry"

d) New Custome r:Confirm that all relevant documents

A new customer Unlikely Major Medium a) In addition to above, perform EDDwho wants to carryout a largetransaction(lnward/ outwardremittance)

A custo mer wants Unlikely Major Medium a) Check the bus iness dive rsificatio nto conduct business b) Perform EDDbeyond its line ofbusines s (import/export/remittance)

Customers that are Likely Major High a) Perform EDDpolitically exposedpersons orinfluen tial personsor head ofinternational



organization andtheir facilitymembers

A new customer Likely Moderate Medium a) Screening against UNSCR/OFAC listwbo wants to carry b) ConductCDDouta lar ge c) Old custo mer of other bank: .transacti on (Import obtain cer tificate from previous bank on "Export) overdue or outstanding bill of entry"

d) New Custo mer:eJ Confirm that all re levant documents

2 Product and ServicesRisk I Lik elih ood Impa ct Risk Trea trne llt/Action

ScoreRetail Easy & Excel)

CASA (Savings Likely Moderate Medium a) Obta in documents of Source 0

Classic, Current fundClassic , Current b) Obtain justi fication from thePlus account, Eazy, customerFuture sta r etc.) c) Making sure that Transaction

Profiles (TP) provided by thecustom ers are proportionatewith the sour ces of fund s, andsupported by necessarydocuments

d) Monitori ng the transactionsexceeding the limits declared intheir TPs, those takin g place atdiffer ent regions of the country

High Value FDR Likely Moderate Medium aj Obta in documents of Source offund

b) Obtaini ng accurate and completeinformation from the customersand ensuring its verification andauthe nti citv of documents

Personal Loan, Unlikely Minor Low a) Collect complete detailsSalary Loan induding guarantorinformation

b) Face to face intervi ew of loancust omer

c) Verifying information obtaine dfrom othe r financialinstitutions

d) Obtaining corroboratio n ofinformation in employer letters,re ferences, pay stubs or cr edit

ej .Strictly follow up ofloan purpose

Retail Privil ege (Premium and Supreme)

Triple benefit Likely Moderate Medium a) Obtain documents of Source offundaccount with b) TIN requiredthr eshold 50 lac c) Perform EDDabove d) Ensure home/office address by

physica l visitatione) Ensure business activity of the client


ML& TF Risk Ma nagement Guidelines

Home and Car loan Very Moderate ' High a) Obta in documents of Source of fundLikely b) Obta in justificatio n from the

customerc) Making sure that Transaction

Pr ofiles (TP) provided by thecusto mers ar e proportionat e withthe 'sour ces of funds, andsupp orted by necessarydocuments

d) Monitoring the transactionsexceeding the limits declared intheir TPs, those taking place atdiffer ent regions of the country

e) ConductED D

POjDD Very Moderate High a] Check background of the clientLikely b) Seek details on benefid ary

c) Obtain purpose of POdj Perform EDO

Small Medium EnterprisePrapti current Likely Moderate Medium a) Check custo mer backgro undaccount b) Perform CDO

c) Monitoring transaction and checkwhe ther it commensurate with sourceof fund

FDR opened where Likely Moderate Medium d) Obtain document in suppo rt of sourcesource of fund is of fundnot clear e) Perform CDD of customerEarly encashment of Very Minor Medium a) Obtain declaration of spedfic reason ofFDR Likely early encashmentMixing of Likely Moderate Medium a) Perform CDD Of customerund isclosed money b) Monitoring transactio n and checkwith regular sales whether it commensurate with so urceproc eeds. of fund

Repayment of loan Likely Modera te Medium a) Monitoring transaction and checkEMlfrom whether it commensurate with sourceundi sclosed source of fundthus bringing b) Arrange periodic visit at customer'sundisclosed money business siteas legal in thefinandal system.

Repayment of full Likely Moderate Medium a) Sourc e of fund of re paym ent to beloan amo unt before ens ured before early adjustment ofmaturity loan.

Loan amount Unlikely Major Mediu m a) Utiliza tion ofloan to be monitoreduti lized in properly.undisclosed secto rother than thesector specifieddur ing availing theloan.


M L & TF Risk M ana gement Guidelines

Repayment of EMI Likely Mode rate Medium a) Monitoring transactio n and checkfrom undisclosed wh ether it commensurate with sourcefamily income of fundNGO taking loan Unlikely Major Medium aj Perform EDDfrom bank, but b) Monitor transaction vigo rouslymixing this fundwith fun d fromundisclosed sourceand provid ing loanto the NGOmembers

Undisclosed so urce Unlikely Minor Low a) Source of security fund (FDR) to beof fund used as obtainedsecurity

Wholesale Banking Division

Payme nt received Unlikely Moderate Low a) Paym ent r eceived only from thefrom unrelated distributors, agents and suppliersthird parties of the customer.

b) Obta in short KYC of depositorIwithdrawer

c) Monitor the transaction report onda ily basis.

Any new product & Likely Moderate Medium a) Identify ML& TF risk of Lie productservice developed b) Vetting obtain from AMLdepartment

High Value FDR Very Moderate High a) Cash Management book high valueLikely FDR of Large r eputed corporate bodies

and Govt agencies.b) Source of fund is confirmed with

supporting documentc) Complete sho rt KYC as per KYC

profile formatd) Conduct Enhanced Due Diligence

Term loan, SODJ Likely Moderate Medium a) Comprehensive Credit memo isLATR,Work Order prepared to analysis client creditFinance, Loan worthiness.Gener al, Lease b) Visit client office, factory andfinance , Bill mortgaged properties.Purchase

LIC Subsequent Likely Moderate Medium a) Proper verification of the value of theterm loan, Letter of imported itemsGuarantee b) Cer tificate from the respective

country's chamber of commercec) Unde rtaking from the

customer regarding the price

Custodial Servic e Likely Moderate Medium a) Ensure that account opened with(Probashi Biniyog) compliance of FER Guideline

b) Close monitoring of transaction.



a1 Verifying other source of income.OBU Unlikely Major Medium a) Perform EDD

b) Obtain information about thecustomer from market

c) Advance allowed cons ideringthe category,

Syndicatio n Likely Moderate Medium a) Pro per verification of the value ofFinancing planted machinery and imported

items.b) Certifi cate fr om the respective

country's cha mbe r of comme rce.c) Undertaking from the

customer regarding the price.

Payment received Unlikely Minor Low a) Payment received only from thefrom unrelated distri butors, agents and suppliers ofthird parties the customer.

b) Obtain short KYC of depositor/withdrawer

c) Mon itor the transaction rep ort ondai ly basis.

DPSDPS opened with Very Moderate High a) Obtain document in support of sourcebig installment and Likely of fundsmall tenure b) Perform EDD of custo mer

c] Checking other relationship of thecustomer with bank

Multiple deposit Very Minor Medium a) Obtain docume nt in sup port of sourcescheme opened by Likely of fundthe same customer b) Perform CDD of customerina bra nch cj Checking other relationship of the

customer with bank

Multip le depos it Likely Moderate Medium a) Obtain docume nt in support of sourcescheme opened by of fundthe same customer b) Obtain written justification from thefro m differen t customerlocation c} Perform CDD of custom er

d) Checking other relationship of thecustomer with bank

Opens DPS in the Very Moderate High 0) Ide ntify beneficial owner and obtainname of family Likely complete inform ationmember b) Obtain written justi ficati on from theOr customerInstallments paid c) Perform EDD of customerfrom the account d) Checking other relationship of theother than the customer with bankcustomer's accountStand-alone DPS Likely Moderate Medium a) Obtain document in support of sou rce

of fundb) Perform CDD of custo mer

Early encashme nt Very Minor Medium a) Obta in declaration of spe cific reason ofLikelv earl v encashment

Credit Car d



Supp lementary Likely Moderate Medium a) Collect all credit card docs as per PPG.Credit Card b) Mention relationshipIssue with supplementary cardholde r

c) Complete KYc.d) Collect & Check CIE report.e) Address & contact number verificatio n

th rough CPV,I) UNSCRsanction and OFAClist checkg) Duplicate card check.

Frequent use of Very Major Extreme a) Obta in the purpose oftransactionCard Cheque and Likely b) Review trans actio nsoverpaid c) Relationship with the accoun t holder,

the account where the fund istransferred,

BFTN cheque or Unlikely Minor Low a) Allow the facility only to renow-nedpay order as mode and selected merchantsof payment ins tead b) Conduct Enhanced Due Diligence (EDD)of account openingat bank (Merchant)

Credit card Likely Minor Low a) Collect all credit ca rd docs as per PPG.iss uance against b) Complete KYc.ERQ an d RFCD c) Collect & Check CIE r eport.accounts d) Address & contact number veri fication

through CPV,e) Duplicate card check,f) Transaction conducted as per Foreign

Exchange policy guideline.

Trad e and Remittance

Line of business Likely Major High a) Check the business diversific ationmismatch b) Arrange physical visitation at business[impc rt/export/re placemittance) c) Perform EDDUnder/ Over Unlikely Major Medium a) Crosscheck the unit pri ce of theinvoicing product int ended for import and(import/ export/re export with the present market pricemittance) b) Perform EDD

Cash retirement of Very Major Extreme a) Checking th e size of the tr ansactionimport bills Likely with customer cas h flow(tmport/export/ re b) Perform EDDmittance)

Relatio nshi p Likely Modera te Medium a) Confirm the purpose of remittancebetween the w ith sup porting docume ntsremitter and b) Perform CDDbeneficiary an dpurp ose ofremittan cemismatch(outward/ inwardr emittance)

-,



3. Business practices/delivery methods or channels

Risk Lik eli h ood I Impact Ris kstore

Tr ea tme nt / Acti on

Wholesale Banking Division

Online (multiplesmall transactionthrough differ entbranch]

Very Likely Moderate High a) Generate report on on-linetransaction and monitor

b] Obtain KYC ofbearerc) Conduct Enhanced Due Diligence

BEFTN

IDBP

New Merchant signup

High volumetransactionthrough POS

Very Likely

Very Likely

VeryUnlikely

Very Likely

Minor

Minor

RetailMinor

Major

Medium 2) Transaction executed as peragreement with the customer

b) Monitor transaction pattern , updateTP and keep track of distribut or s

Medium a) Ch eck the genuine ness of the LCandacceptance from BBdashboard.

b) Perform CDD

Credit Card)Medium a) Complete MerchantKYC

b) Visit Merchant physically and conductfeasib ility analysis

c) Collect all documents as per PPG

High a) Check Merchant product & price andmatch with POStransaction

b) Check Transaction Profile of merchantc) Conduct Enhanced Due Diligence

ADC

Medium a)

Large amountwithdrawn fromATMs

Larger amounttransaction fromdifferent locationan d differenttime(midnight]through ATM

Likely

Likely

Minor

Moderate

Low a) Generate re port from the system andmonitor the transactions.

b) Apply transaction restri ctionpolicy (trans acti on limi t) .

c) Inform issue r bank if possible.d) Follow Central Bank, International

Payment Association MLrulese) Also inform the Cards payment

Association (i.e. Visa, Master Card].

Generate report from the syst em andmonitor the transactions.

b) If any irregularities found, informrelevant branch and department

Large a mount cashdeposit in CDM

Likely Minor Low a) Before giving input in CBS, branchpeople will ask the customer aboutthe authenti city of the deposit

b) If any ir regularities found , informrelevant department

BRAeBank Ltd Page 101 of 123

ML & TF Risk Manage ment Guidelines

Huge fund transfer Likely Moderate Medium a) Dual registration (both online andth r ough intern et branch) at the time of taking internet .

banking facility.b) Apply transaction restriction policy

(transacti on limit in terms of number andamount, sessio n time limit).

c) Generate report from the system andmonitor the transactions.

d) IE administrator communicates withcusto mer if customer transaction reachesthe highest level every time

Customer toVery Likely

ModerateHigh

a) Only allow transaction with businessbus iness houses that are listed under paymenttransaction-Online processors (e-commerce merchant)Payment Gateway - app roved by Bangladesh Bank.Internet Banking b) Arrange AML & CIT training for payment

pr ocessors and obtain KYC of businesshouses

c) Conduct Enhanced Due Diligence

Trade & RemittanceCusto me r se nding Very Likely Moderate High a) Check whethe r the transaction meets there mittance through central Bank guide lineI circular,SWIFT und er single b) Obtain purpose of the remittance fromcustomer credit the customer (docume nts if requir ed).transfer, c) Screen the custo mer details against

UN/O FAC Sanctio n listd) Beneficiary's proper identification sho uld

be taken (such as nam e, alc number, fulladdress, country name).

ej Applicant's proper ide ntification shouldbe taken (such as name, alc number, fulladd ress, country name).

f) Applicant, Beneficiary, Beneficiary's Bankand Beneficiary's correspondent sh ouldbe checked whether they are under anysanction list or not.

g) Conduct Enhanced Due Diligen ce

Existing customerI Likely Minor Low a) Cform should be taken (if necessary)other bank before release of remittance.customer receivin g b) Obtain any other docume nt as and whe nr emittance through required.SWIFT. cj ConductCDD

4 Cou ntry/Jurisdiction

Risk Lik elihood Impact Risk Treatmentl ActionScor e

Impor t and export Unlikely Major Medium aj Automated screening mech anism

to sanction against Sanction list should be in place

country b) Procedure in place to treat such

'.



Transshipments, Unlikely Major Medium a) Automated screening mechanism

container, flag against Sanction list should be in place

vessel etc. under b) Procedure in place to treat such situ ation

glohal sanction

Establi sh ing Unlikely Major Medium aj Automated screening mechanism

corres pondent agains t Sanction list should be in place

relationsh ip with b) Procedure in place to treat such situation

sanctio n bankc) Perfo rm KYC/CDD with

and/or countrvthe correspondence bank

Establishing Unlikely Major Medium a) Obta in KYC from th e cor respondent

correspondent bank

relationship with b) ensure the spe cific purpose for

poo r AML practiceestablishing corresponde ntrelationship

country c) Perform EDD

b. Regulatory riskRegulatory risk is associated with not meeting all obligations of banks under the MoneyLaundering Prevention Act, 2012, Anti-Terror ism Act, 2009 (including all am endments), therespective Rules issue d under these two acts a nd instructions issu ed by BFIU. Following aresome examples of ML&TF risk the ban k faces in terms of non- complianc e of regulati ons and the

bl dnossi e wavs to re lice and manage those risks .Risk Likelihood Impact Risk Treatment/Action

scoreNot fanning an AMLD Unlike ly Moderate Low Formati on of AMLDas per

the requirement of BFIUontime

Not having an AML & CFT . Unlikely Moderate Low Appointment of AML&CFTCompliance Officer Compliance Officer as per

BB prescribed directive.

Not having Bran ch Anti-Mon ey Unlikely Moderate Low Appointm ent of Branch AntiLaundering Compliance Office r Money Lau nd ering

Compliance Office r(BAMLCO) as per BFIU;n<

Not having an AML & CFT Unlikely Major Medium Developing AML& CFTprogram program and review from

time to timeNo senior management Unlikely Moderate Low Senior management shouldcommitment to comply with be committed to complyMLP an d AT Act with MLP and AT Act an d

sh are th e commi tment wi thbank officials at leastannuallv

Not having an AML & CFT policy Unlikely Moderate Low Develop policy guideline onguid elin e approved by the boa rd MLP & CTF an d have it

approved by the board

Failure to follow the AMLD/BFIU Unlikely Major High a) Follow the AMLD/BFIUcircular, circular lette r, circular, circular letter,ins tructions etc. instructions

b) Regular inspection


ML & TFRisk Management GuideJines

Unique account opening form not Unlikely Moderate Low Develop account opening formfollowed while opening account for the bank in line with the

unique account opening formpresc ribed by BFIU

Non screening of new and existing Likely Moderate Medium Screen all new and exis tingcustomers against UNSCR Sanction customers against UNSCRand OFAC lists Sanction and OFAC lists

Violation of Foreign Exchange Likely Moderate Medium Follow the Foreign ExchangeRegulation Act, 1947 while dealing Regulatio n Act, 1947 whilewith NRB accounts. dealing with NRB accounts

Accurate and complete information Likely Moderat e Medium Obtain accurat e and completeof customer not obta ined info rmation of customer,

review and update from tim eto time

Failure to ve rify the identity proof Likely Major High a) Verify the identity proo fdocument and address of the document with the supportcustomer of database from

concerned authoritybj Verify addr ess by sending

th anks lett er or cond uctCPV or physicalverificatio n by bank officialand .receive, recordsupporting document withAOF

Beneficial owner identifica tion and Likeiy Major High Identify beneficial owne r ofver ification not done properly the account . and obtain

accurate and comp leteinformation

Customer Due Diligence (CDD) not Likely Major High Conduct Customer Duepracticed Diligence (CDD) as per BFIU

instructionFailur e of doing Enhance d Due Likely Major High aj Obtain Senior ManagementDiligence (EDD) for high risk ap prova l before open ingcustomers [i.e., PEPs, family such accountmembers and close asso ciates of b) Conduct Enhanced DuePEPS and influential person and Diligence [EDD) for highsenior official of international risk customers as per BFIUorganization.) instruction

Failure to complete KYC of customer Likely Major High Complete KYC profile form forincluding walk in customer all customer as per BFIU

instructionFailur e to update TP and KYC of Likely Major High Update TP & KYC as per th ecustomer instruction of BFIUKeep the legacy accounts operative Unlikely Major Medium Updat e KYCof legacy accountwithout completing KYC else keep those as dorman tFailure to assess the ML& TF risk of Unlikely Major Medium Assess th e ML & TF risk of aa product or se rvice before launching pr oduct or service before

launching and have the PPGap proved by CAMLCO

Failur e to complete the KYCof Likely Major High a) Complete the KYC ofCorrespondent Bank Correspondent Bank

reciprocally



b) Obta in updated KYC ofCorrespondent Bank fromtime to time

Senior Management app rova l not Unlikely Major Medium Obtain Senio r Managementobtained before ente ring into a approval before ente ring into aCorrespondent Banking Correspondent Bankingrelationship relationship

Enter into a relationship with shell Unlikely Major Medium Check whether thebank correspondent bank is ashen

ban k

Failure to comp ly with the Likely Major Medium aj Monitor the AML & CFTinstruction of BFlU by activity of foreign

Foreign subsidiary subsidiaryh) Get confirmatio n from the

subsidia ry on compliance

Failure to keep record properly Likely Major High Keep records as per BFlUinstruction

Failure to repo rt complete and Unlikely Major Medium a) Rectify the lack in CBSaccurate CTR on time b) Ensure uniformity of CTR

submitted through goAMLweh and FlUsoftwa re

cj Submit complete andaccurate CTR on time

Failure to monitor CTR Likely Major High Monitor the transaction sreported in eTR on monthlybasis

Failure to identify and monitor Likely Major High Identify and monito rstructuring structuring on monthly basisFailure to provi de sufficient Likely Major High Generate high valu econtrols and monitoring systems transaction report, TP exceedfor the timely detection and report, structuring report fromreporting of suspicious activity the syste m to analyze and

dete ctSTR

Failure to r eport susp icious Likely Major High Monitor acco unt transa ctiontransaction repor t (STR) and customer activity and

report when susp icions arise

Failure to conduct quarterly meetin g Unlikely Moder ate Low Conduct quarterly meetingproperly. pr operly in line with the

agenda and instruction of BFlUFailure to conduct se lf-assessment Likely Moderate Medium aj Conduct self-assessmentproperly properly

h) Portray the actual strength ,weakness and positio n ofthe branch in self-ass essment

Failure to submit statement/ Unlikely Major Medium Submission of statement/re port to BFlUon time re port to BFlU timely

Submit erroneous sta tement/ Likely Major High Check minutely the statementsreport to BFlU before submitting the same to

BFlUNat comp lying with any orde r for Unlikely Major Medium Complying with order forfreezing or suspension of freezing or suspe nsion of



issued by BFIU or BB transaction issu ed by BFIU orBBinstantly

Nat submitting accurate Unlikely Major Medium Provide accurate information toinformation or statement sought by BFIU on timeNot submitting require d report to Unlikely Moderate Low Remain vigilant to submit allsenior management regularly the report to Senior

Management timely

Failur e to rectify the objections Likely Major High Regularize the objectionsraised by BFIU or inspection teams raised by BFIU or inspectionon time teams on time and submit

complia nce report

Failure to obtain information during Likely Major High Obtain infonn ation during wirewire transfer transfer based on the thresholdFailure to comply with the Likely Major High Comply with theresponsibilities of ordering. responsibilities of ordering,intermediary and beneficiary bank intermediary and beneficiary

bank as per BFIU instruction

Failure to scrutinize staff p roperly Unlikely Major High a) HRto screen theapplicant's details beforerecruitme nt

b) Conduct refer ence check

Failure to circulate BFlU guidelines Unlikely Major Medium Updat e the bra nches onand circulars to branches circulars/ circular letter s/

instructions receive d fromBFIU

Inadequate tr aining /workshop Unlikely Major Medium Arrange workshop on MLP &arranged on AML & CFT CFT for employee s to build up

awareness and conductevaluation test

No independent aud it function to Unlikely Major Medium ICC to test the AML programtest the AML program and conduct independent

testing procedure.


M L& TF Risk Management Guidelines

Annexur e-B

RYCDOCUMENTATION RED FLAGS POINTING TO ML/ TF

RYCDocumentationCust omer type

Document forStandard Identi fication Document verification of source of

funds

Document orstrategy for

ve rification ofaddress

NB: But in case of submitting thebirth registration certificate, any •othe r photo id (issued by aGovernment department or agency)of the person has to be supplied •with it. If he does not have a ph oto •id, then a certi ficate of identity byany renowned people has to be •submitted according to the bank 'srequirement. That certificate must •include a photo which is dulyattested by the signing renown ed •person. The person should sign thecerti ficate (printing hisfh er named early underneath) and clearlyindicate his/her position or •capacity on it together with acontact address and phone number. •

Individual s

• Passpo rt• National IDCard• Birth Registr atio n

Certificate (Printed copy,with seal & signatu re fromthe Registrar)

• Valid driving license(if any) Credit Card(if any)

• Any other documents thatsatis fy to the bank.

•

•

•

•

Salary Certificate (Forsalarie d person)Employed ID(Forascertaining the level ofemployment).Self-declarationacceptable to the bank.(commensurat e withdeclared occupation)Documents in supportof beneficial owner'sincome (income ofhous e wife, studentsetc.)Trade License if thecustomer declar ed tobe a business personTIN (if any)Documents of propertysale. (if any)Other Bank statement(if any)Document of FDRencashment (if any)Document of foreignremittance (if any fundcomes from outs ide thecountry)Documen t ofr etirement ben efit.Bank loan.

•

•

•

•

•

•

Acknowledgementreceipt of thanksletter throughpostal department.Proof of deliveryof thanks letterthro ugh courier.Third partyverification report.Physicalverification reportof bank officialCopy of utilitybill/utility card onsatisfaction of thedealing officer(not beyond 3months old). Thebill should be inthe name of theapplican t orhis/her parent' sname.Residentialaddress appearingon an officialdocumentprepared by aGovernmentAgency



• Passport • Salary Certificate [For • Acknowledgement• National ID Card salaried person) rece ipt of thanks• Employed 1D [For• . Birth Registration

ascertaining the level of letter throughCertificate [Printed copy, employment). postal departmentwith seal & signature from • Self-declaration • Proof of deliverythe Registrar) acceptable to the bank. ofthanks letter

• Valid driving license (commensurate with through courier.[if any) Credit Card decla red occupation) • Third party[if any) • Documents in support verification report

• Any other documents tha t of beneficial owner's • Physical .satisfy to the bank. income [income of verification report

house wife, students of ban k officialetc.) • Copy of ntili ty

• Trade License if the bill/utility card oncustomer decla red to satisfaction of the

Joint Accounts be a bus iness person dealing officer• TIN [if any) [not beyond 3

• Documents of property months old). Thesale. [if any) bill should be in

• Other Bank statement the name of the[if any) applican t or

• Document of FDR his/her parent's

encashment [if any) name.

• Document of foreign • Residential

remittance [if any fund address appearingcomes from outs ide the on an officialcountry) document

• Document of prepared by ar etirement benefit

Governme ntBank loan .

Agency



• Passport • Trade Licens e TIN • Acknowledgemen t• National ID Card • Self-declara tion receipt of than ks

acceptable to the bank. letter through

• Birth Registration Certi ficate (commensurate with postal departmen t(Print ed copy, with seal & nature and volume of • Pr oof of deliverysignatu re from the Registrar) business) of thanks letter

• Documents of pr operty through courier.• Valid dr iving license (if sa le. (if injecte d any • Third party

any) fund by se lling veri ficatio n report.• Cred it Card (if any) perso nal pro perty) • Physical• Rent receipt of the shop • Other Bank stateme nt verification report

(if the shop is rental) (if any) of bank offi cial

• Docume nt of FDR • Copy of utilitySole • Owners hip docume nts of the

encashment (if an y bill / utility card onPropriet orships shop [i.e, pu rchase documents of

fund inject ed by en- satisfaction of theor Individuals th e shop or inheritance

cashi ng personal FDR) dea ling officerdoing bus iness documents)

• Document of foreign (no t beyond 3• Membership certificate of any

remi ttan ce (if any fund months old) . Theassociatio n. (Cha mbe r of

comes from outs ide,the bill sho uld be incomers, market asso ciation,

country) the nam e of thetrade association i.e.: Hardware

• Bank loan (if any) ap plicant orassociation, cloth merchant

• Person al borrowing (if his /her parent'sassociation, haw ker's

any) name.asso ciation etc.

• Residential• Any other documents that

address appearingsatis fy to the bank.

on an official

document

prepared by

Government

Azencv• Partnershi p deed/ partnership • Trade License TIN • Acknowl edgem ent

letter • Self-declaration receip t of thanks• Registered partnership deed (if accep table to th e bank. letter through

r egistered) (commensu rat e with , posta l department

• Reso lution of the partners, nature and volume of • Pr oof of deliverysp ecifying operational bus iness) of thanks letterguide lines/ instruction of the • Documents of property through courier.partnersh ip acco unt. sale. (if injected any • Third party

Partnersh ips • Passp ort of partners fund by se lling verificatio n report• Nationalld Card of personal pr operty) • Physical

partners • Other Bank sta teme nt verification report• Birth Registrati on Certificate of (if any) of bank official

partners (Printed copy, with • Document of FDRseal &signa tur e from the encashment (if anyRegistrar)

fund injected by en-

cashing pe rsonal FDR)

' BRAC Bank ltd Page 109 of 123


• Valid driving license of partners • Document of foreign • Copy of bill/utility(if any) remittance (if any fund card on

• Cred it Card of partners (if any) comes from outside the satisfactio n of the• Rent receipt of the shop (if the country) dealing officer

shop is ren tal) • Bank loan (not beyond 3• Ownership documents of the • Personal Borrowing (if months old). The

shop (i.e. purchase documents of any) bill should be inthe shop or inheri tance the name of thedocum ents) applicant or

• Membership certi ficate of any his/her pare nt'sassociation, (Chamb er of name.comers. market associat ion, • Residentialtrade associatio n i.e.; Hardwar e address appearingassociation, cloth merchant on an officialasso ciation, hawker's documentasso ciatio n etc. prepared by a

• Any other documents that Governmentsatisfy to the bank Agency

• Passport of all the directors • A copy oflast available• Nationa l ld Card of all the financial statements

directors duly authenticated by• Certificate of incorporati on compete nt authori ty• Memorandum and Articles of • Othe r Bank sta tement

Assod ation • Trade License TIN• List of directors • VAT• Resolutio n of the board of Registration

directors to ope n an account • Bank Loan

and identificatio n of those whohave authority to operate theaccount

Private Limited • Power of attomey granted to its

Companies Managers. Officials orEmployees to transact businesson its behalf.

• Nature of the compa ny'sbusiness Expected monthlyturnover

• Iden tity of beneficial owners,holding 20% interes t or mor e ofhaving control ove r thecompany's assets and anyperson (or persons) on whoseinstructions the signatories of

'. the account act where suchpersons may not be a full timeemployee , officer or director ofthe company

BRAe Bank Ltd Page 11 0 of 123


• Passport of all the directors • A copy of last available• National Id Card of all the fina ncial statements

directo rs duly certified by a

• Certificat e of inco rporation professionalacco untant

Memoran dum and Articles ofAssociatio n • Other Bank stateme nt• Certificate of commencemen t of (if any)

busines s

• List of directo rs in form -Xll • Trade Licens e

Resoluti on of the board of TIN

directors to ope n an account and• Cash flow

identification of those who have statementautho rity to ope ra te the account

• Power of attorney gra nted to its • VAT registrationPublic Limited Managers, Officials or

Compa nies Employees to transact business • Bank Loan

on its behalf.• Any other• Nature of the company's

business Expected monthlygenuine so urce

turno ver

• Identity ofbeneficial own ers,

holding 20% interest or more ofhaving control over th ecompany's assets and any

person (or pe rso ns) on whoseinstructions the signa tories ofth e account act where such

persons may not be a full time

emp loyee , office r or director ofthe company.

• Statu e of formation of the entity• Resolution of th e boa rd to open

Government- an account and identificatio n ofOwned those who have authority to N/A N/AEntities operate the acco unt.

• Passpo rt and NIDof theoperato r(s)



• National ld Card of the • A copy of lastoperator(s) available financia l

• Passport of the operator (s) sta tements duly

• Resolution of the board of certified by adirectors to open an account pro fessionaland identification of those who accountanthave authority to operate the • Oth er Bank

NGO account. statement• Documents of nature of the NGO • TIN

• Certificate of registration issued • Certificate ofby competent author ity Grand/Aid

• Bye-laws (certified)• List of Manage ment

Committee/ Directors

BRAC BankLtd Page 112 of 123

•

••

Charities orReligious

Organizations •

•

••

•

••

Clubs or Societies•

•

••

National Id Card of the •operato r(s)Passport of the operato r(s)Resolution of L'Je Executi veCommittee to open an accountand iden tification of those who •have authority to opera te th e •account •Docume nts of natu re of the •organizationsCertificate of registration issuedby compete nt authority (if any)Bye-laws (certified)List of Man agement Committee/DirectorsNational Id Card of the •opera to r(s)Passpo rt of the operator(s)Resolutio n of the ExecutiveCommitte e to open an accountand identification of those who •have authority to operate theaccount •Docume nts of nature of theorganizatio ns. •Certi ficate of registration issuedby competent auth ority (if any)Bye-laws (certified)List of Management Committee/Directors


A copy of last availablefinancial statementsduly certified by aprofessionalaccountantOther Bank statementCertificate of Grant / AidDonationAny other legal source

A copy oflast availablefinancial statementsduly certi fied by aprofessional (ifregis te red)Other BankstatementCertificate ofGran t/AidSubscription ifunr egistereddeclaration ofauth orized person/body.

Trusts ,Foundatio ns orsimilar entities

FinancialInstitutions

(NBFI)

• National Id Card of the trustee(s) •• Passport of the trustee(s)• Resolution of the Managing

body of theFoundatio n/Associatio n to openan account and identification of •those who have autho rity tooperate the account •

• Certi fied true copy of the TrustDeed

• Bye-laws (certified)• Power of attomey allowin g

transaction in the account• Passpo rt of all the directors •• National Id Car d ofall the

directors• Certificate of incorporation

Memorandu m and Articles ofAssociatio n •• Certificate of commenceme nt of

business •• List of directors in form -XII •

Resolution of the board of •directors to open an account andiden tification

BRAe Bank Ltd

A copy of last availablefinancial statementsduly certified by aprofessional (ifregistered)Other BankstatementDonation

A copy oflast availablefinancia l sta tementsduly certified by aprofessionalaccountantOther BankstatementTrade License TINVAT registrationCash flowstatement

Page 113 of 123

Embassies

M L & TF Risk M ana gement Guidelines

of those who have authority tooperate the account• Power of atto rney granted to its

Manager s, Officials orEmployees to transact husinesson its behalf.

• Nature of the compa ny'sbusiness

• Expected monthly turnover• Identity of beneficial owners,

holding 20% interes t or more ofhaving contro l over thecompany's assets and anyperson (or persons) on whoseinstructions the signatories ofthe account act where suchpersons may not be a full timeemployee, officer or director ofthe comnanv.

• Valid Passport with visa of theauthorized official

• Clearance of the foreignministry

• Other relevant documents insupport of opening account

..

Important: This is an indicative list of documents. However, any contradiction with existing policyshould he referred to CAMLeo Ieee for better guidance.



Annexure- CRED FLAGS POINT1NG TO MONEY LAUND ERING

• The client cannot provide satisfactory evidence of identity.• Situa tions where it is very difficult to verify customer informati on.• Situations where the source of funds cannot be easily verified.• Transactions in countries in which the parties are non-residents and their only purpose is

a capital investment (they are not interested in living at the property they are buying).• Frequent change of owne rship of same property in unusually short time per iods with no

apparent business, economic or at-her legitimate reason and between related persons.• Client wants to re-sell Property shortly after purchase at a significantly different purchase

price. without corresponding changes in market values in the same area.• Client wishes to form or purchase a company whose corporate objective is irrelevant to

the client's normal profession or activities, withou t a reaso nable explanation .• The client sets up shell companies with nominee shareholders and/or directo rs.• Client repeatedly changes Attorneys within a short period of time without any reasonable

explanatio n.• Client purchases property in names of other pers ons or uses different names on offers to

purchase, closing documents and deposit receipts.• Client deposits a large amount of cash with you to make payments which are outside of the

client's profile.• Client negotiates a purchase but wants to record a lower value on documents, paying the

difference "under the table", (inadequate consideratio n).• Client's documents such as identification, statement of income or employment details are

provided by an intermediary who has no apparen t reason to be involved, (theintermediary may be the real client).

• Transaction involves legal 'entities and there is no relationship seen between thetra nsaction and the business activity of the buying company, or the company has nobusiness activity.

• Client requests the firm to act as his agent in obta ining high sum bankers' drafts, cashiers'cheques and other cash equivalent or near cash monetary instru ments or in making wiretransfers to and from othe r banks or financial institutions, (anonymity) .

• Divergence from the type, volume or frequency of transactions expected in the course ofthe business relationship.

• Client gives power of attorney to a non-relative to conduct large transactions (same asabove).

• Use of letters of cred it to move money between those countries, where such trade wouldnot normally occur and / or is not consistent with the custo mer's usual business activity. A

, Letter of credit is generally resorted to so as to accord mor e legitimacy to the transactionin order to conceal the real facts.

• The method of payment requested by the client appears inconsistent with the riskcbaracteristics of the transaction. For example receipt of an advance payment for ashipment from a new seller in a high-risk jurisdiction.

• The transaction involves the use of repeatedly amended or frequently extended letters ofcredit witho ut reasonable justification or that includes changes in regard to the bene ficiaryor location of payment without any apparent reason.

• Inward remittances in multiple accounts and payments made from multip le accounts fortrade transaction of same business entity are indicators for TBML. In this regard the studyof foreign exchange remittances may help detect the offence.

• The commodity is shipped to or from a jurisdiction designated as 'high risk ' for MLactivities or sensitive / non co-operative jurisdictions.



• The commodity is tr ansshipped through one or more such high risk I sensit ivejurisdictions for no apparent economic reaso n.

• Tra nsaction involves shipment of goods inconsistent with normal geographic tradepatterns of the jurisdiction i.e. trade in goods othe r than goods which are normallyexportedI imported by a jurisd iction or which does not make any economic sense.

• Significant discrepancies appear between the value of the commodity report ed on theinvoice and the commodity 's fair market value .Consignmen t size or type of commodity being shipped appears inconsistent with the scaleor capacity of the exporter or importer's having regard to their regular business activitiesor the shipment does not make economic sense i.e. there is no reasonable explanation forthe client's financial investment into the shipment.

• Trade transaction reveals links between representatives of companies exchanging goodsi.e, same owners or management

Red Flags pointing to Financing of TerrorismBehavioral Indicators:

• The parties to the transaction (owner, beneficiary, etc.) are from countries known tosupport terrorist activities and organizatio ns.

• Use of false corporations, including she ll-compan ies.• Inclusion of the individual or entity in the United Nations 1267 Sanctions list.• Media repo rts that the account holder is linked to known terrorist organizations or is

engaged in terrorist activities.• Beneficial owner of the account not properly identified.• Use of nominees , trusts, family members or third party

accounts . Use of false identification.• Abuse of non-profit organization.

Indica t ors link ed t o the finan cial transactions:• The use of funds by the non-profit organization is not consistent with the purpose for

which it was estab lished.The transaction is not economically justified considering the account holder's businessor profession.Aseries of complicated transfers of funds from one person to another as a means to hidethe source and intended use of the funds.

. • Transactions which are inconsistent with the account's normalactivity. Deposits were structured below the reporting requirementsto avoid detection. Multiple cash deposits and withdrawals withsuspicious references . '

• Frequent domestic and international ATM activity.• Nobusiness rationale or economic justification for the

transaction. Unusual cash activity in foreign bankaccounts.

• Multiple cash deposits in small amounts in an account followed by a large wire transferto another country.

• Use of multiple, foreign bank accounts.

"

BRAe Bank lt d Page116 of 123

J

ML & TFRisk Managemen t Guidelines

Ann exu re: D

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Augu st 26, 20 15

EXTR.A.CT F?OM THE RESOLU TION OF TrjE 158 "" BOARD MEETiNG OF BRAe BANK UMITED HELD ON

MONDA". AUGUST 24, 20 I SAT THEBOARD ROOM OF BRAe BANK LIMITED 1r GULSHAN ,6,VENUE.GUL5ii P.~~- l , DHAKA - 12 12, BANCLA.DESH.

AGENDA: 18

Aocrcval memo or; Bkash overs ight policy

Approval Memo BBl-i HO.' CS: [BEl 20 1') dated Acqust IG. 20 15 on bkash cvers tqh t polley was

tabled and noted.

Resolved that the qutdehne on bkasb oversight policy is hereby approved .

Extract anesred by,

.~Rais Uddi n Ahmad

Company Secretary ,.

Head of L~9al and Regul.:lfory Aff;;.ir;;

and CAMlC O


ML & TF Risk Management Guidelinest <

Memorandum ro the Beare of Directcr s

Board M€:iio -;r BBL;HOi CS,'1 83/2 0 15

AoonJlJal memo on Bkash oV-Erslq.t!-P-olir.v

MEMORANDUM

Aug ust 16', 2015

B.,r.gladesh Sank Issued mobil e banking 'license to BRAe Sank Lim it ed (SSL) as a pan of

Financial inclusion.. Otl the other hand, BP.AC r: <li~k has formed bKash as thei r subsidiary

to hand le Mobile Finar:ci;::,J Services (r'J1 FS)~ BR.:\.C Bank must ensure that b Kash is

_perfofming its a<t; \' ir1~ foltcwinq tbe MFS qu loel ine and directive issued by Centra: Bank

of Bangtacesh. Therefor e. i~ becomes necesserv fix 'BRAe Bank (Q have en oVl:fsigl,t

Policy in place on bkas h to 'ensure smooth cperaticn of bu siness , services and

compliance issue of bKash ltd . ,A,ccordingl y, we have developed a BRAe Bank oversight

documen t of bK.ash in light of AM L. KYC and CFT as regulatory requlrernanr, as 'Nell as

MasterCard for the-ir incoming re mitta nce. in lna nv e.

We ctace this gu ideline for tht; ap proval of Board of Directors .

Ra~~mad----Company Secretary,

Head of Legal"& Regulatory Affairsand C"MLCO

BRAe Sank ltd

Syad Mahbubur RahmanManag ing Director & CEO

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./ML & TF Risk Manageme nt Guidelines

BRAe BANK OVERSIGHTDOCUMENT

OfbKash


M L & TF RiskM onogement Guidelines

INTRODUCTIONBangladesh Bank acting as Central Bank has always had a close inte rest in the safety andefficiency of payment and settlemen t systems. Payment and settl ement systems are a cru cialpart of the financial infrastructure of a country and it is essentia l that they function safely andefficiently. The Government of Bangladesh has promulgat ed Anti Money Launderin g Act, 2012("AML") and Anti-Terrorism (Amendment) Act, 2009 ("CFT '). To implement these laws amongBanks and Financial Institutions, Bangladesh Bank has issued various Policyf Guideline onMoney Laundering and Terrorist Financing through BFlU Circulars and directives. BangladeshBank also issued Mobile Finan cial Services (MFS) guidelines for the Banks and its subsidiariesfor smooth operation of MFS.

Bangladesh Bank issued mobile banking license to bKash Limited as a sub sidiary of BRAC BankLimited to handle MFS with in the broader concept of 'Financial Inclusio n'. BRAC Bank Limitedmust ensure that bKash Limited is performing its activity following the MFS guidelines anddirectives issued by Banglades h Bank (Central Bank of Bangladesh). Therefore, it becomesnecess ary for BRAC Bank Lmited to have an overs ight Policy in place on bi<ash Limited toensure smooth operatio n of business , se rvices and complia nce issue of bKash Limited.

PURPOSEThe purpose of this guideline is to:

1. Ensure regulatory framework of bKash Limited for the MFSoperati on;2. Ensure compliance with Anti-Money Laundering and Combating Financing of Terr orism

(AML & CFT) standards set by AML & CFT rules, re gulations, guidelines and instructionsissu ed by Bangladesh Bank.

PROCESSIn accordance with Banglad esh Financial Intelligen ce Unit (BFlU) of Banglades h Bank MasterCircular 10 dated 28 December, 2014 Article LS, the core responsibility for AML & CFT forbKash Limite d as a subsidiary of BRAC Bank Limited lies with bKash limited. In terms of AML &CFT, bKash Limited will function as an Independent Reporting Organization, establishe d its ownIndependent Compliance Organization to monitor and deal with AML & CFTissu es.BRAC Bank will be responsible for ensu ring that bKash Limited has tak en necessary measuresfor AML & CFT compliances as per rule s, regulati ons, guidelines and instructions issued byBangladesh Bank. Therefore, BRAC Bank Limited Compliance Team will take necessary steps toensu re to oversee that bKash Limite d is confonning to the guideli nes. The following steps willbe initiated by BRAC Bank Limited Compliance Team:

1. Training & Awareness: BRAC Bank Limited Compliance Team will monitor Trainingand Awareness Program arranged and conducted by the Chief Anti-Money LaunderingCompliance Officer (CAMLCO) of bKash Limited. bKash Limited will be responsible toconduct its own AML & CFT Tra ining and Awareness activities for its employees andstakeholders . In additio n, Training of Trainers for bKash Limited employees associatedwith compliance .responsibility may be arranged by BRAC Bank Limited ComplianceTeam. Assistance regarding AML & CFT training may also be sought from BangladeshBank. In addition to the training organize d by bKash Limited, BRAe Bank LimitedCompliance Team may conduct AML & CFT training for bKash Distributors and Agents.AML & CFT training conducted by BRAC Bank Limite d may be arranged in vari ouslocations. .

2. Distributor Due Diligence: BRAC Bank Limited will ensure through the ComplianceOrganization (CAMLCO) of bKash Limited that bKash Limited follows set of DueDiligence processes for their prospective Distributors. The criteria are:

..



Trade License of existing busi ness ; Certificat e of Incorp oration with Joint StockRegistrar.Photo ID photocopy (copy of National ID/Passport/DrivingLicense ).2 copies of passport size photographs.Tax Identification Certificate (TIN).Agreement between bKash Limited and Distri buto r.Applicant's existing Business Profile.Custo mer Due Diligence (CDD) of KYC of the Distributor.

bKash Limited will conduct AML & CFT Compliance Field Asses sments of Distributors/Agent sthrough its own Compliance Field Assessment Team (CFAT) functioning under the CAMLCO ofbKash Limited and monito red by the Central Complianc e Committee [CCC) of bKash Limited.bKash Limited will cover the prescribed numb ers of Compliance Field Assessment Inspectionsas per Bangladesh Bank require ments.In addition. BRA C Bank Limited may conduct inspection at Distributor/Agent location at anypoint in time with prior notification. bKash Limited ...Jill pr ovide necessary support to BRACBank Limited in doing the same.

3. Customer KYC: The potenti al Customers of bKash Limited will have to fill out thecomplete standard KYC Form incorporating the guidelines of Bangladesh Bank. bKashLimited will use its best endeavor to verify the identity of any person seeking to open anAccount to the extent r easonable and pra cticabl e. bKash Limited will also maintainrecords of the information used to verify a person's identity, including name, addressand other identifying information. bKash Limited shall provi de the updatedinform ation/documents as req uested by BRACBank Limited.

4. Id en tity Verification: bKash Limited will undertake reasonable steps to ensure thattrue and accurate informatio n fro m the prospective Customer have been taken. bKashLimited will take reasonable steps to ensure that the person opening the bKash Accountis the genuine owner of the SIM provided for Account opening as per the availableverification system/process implemented by Banglade sh Bank. A Customer ...Jill beallowed to open Accounts as per regu lato ry guidelines of Bangladesh Bank.

5. Agent Information/ Selection ofAgents: The prospective Agents ofb Kash Limited shallprovide requir ed documents/ informati on at the time of opening of Agent Account, asand/or where applicable, such as photo, proof of Identity [copy of NationalID/ Passport/Driving License), Trade License / Bank Account details, properly filled outAgent KYC,et c.

The followin g issues should be taken into account for selection of Partners/ Agents:1. Competence to implement and support the proposed activity.2. Financial soundness.3. Ability to meet commitm ents under adverse conditions.4. Business reputation.5. Securi ty and internal control, compliance coverage, reporting and monitoringenvironm en l

6. COMPLIANCE PROGRAM:bKash Limited will establish arrangem ent for internal compliance monitoring andcontrol through formation of a Centr ai Compliance Committee [CCC) unde r tbeleade rship of a high official at the Head Office. This CCC will function independently asper the guidelines of Bangladesh Bank laid vide BFlU Master Circular 10. However, theCCC of bKash Limited will liaison with the Compliance Team of BRAC Bank Limited asand when required. bKash Limited will designate a CAMLCO at its Head Office who is tobe sufficiently authorized to impleme nt and



enforce corporate-wide AML & CFT policies, procedures, Compliance Field Assessments,dispute resolution and other associated measures. The CAMLCO will directly repo rt tothe Chief Executive Officer (CEO) of bKash Limited. The CAMLCO will also be responsibleto coordinate and monitor day to day compliance with applicable AML & CFT relatedlaws, rules and regulatio ns as well as with its inte rna l policies, practices, proce dures.monitoring. controls and self-assessment

7. TR<\.NSACTION MONITORING,bKash Limited will estab lish reasonable measures to monitor the Customer transactionsas per the regulatory rules, guidelines and instructions of Bangladesh Bank. bKashLimited should have sufficient systematic tools in place to monitor the transactions.bKash Limited will gene rate a monthly rep ort where the maximum allowable amount ofa Account is fully used by the account holder.

8. SUSPIClOUSACTIVIT,.REPORT (SAR) /SUSPICIOUS TRANSACTION REPORT(STR):BRAC Bank Limited will monitor that bKash Limited generates SAR/STR in accordancewith the guidelines of Bangladesh Bank bKash Limited will implement a SAR/STRProcess copy of which is to be forwarded to the Compliance Team ofBARC Bank Limited.It would be prudent for CAMLCO of bKash Limited to record his/her detennination inwriting and where the re is a doubt, it would also be pru dent for the CAMLCO to make areport to the Bangladesh Bank. Ther efore the CAMLCO of bKash Limited will keep awritt en record of every matter reported to him, of whether or not the suggesti on wasnegated or reported, and of his reaso ns for his decision. SAR/STR will be submitt ed inthe prescribed fonnat directly to the General Manager, BFlU, Bangladesh Bank, HeadOffice, Dhaka under sealed cover note mentioned on th e cover "Highly Confidentia lSAR/STR". bKash Limited will also provide a copy of SAR/STR to CAMLCO/DCAMLCOofBRAC Bank limited.

9. REPORTS:The CAMLCO of bKash Limited will submit AML & CFT Compliance reports toBangladesh Bank as per BFlU guideline laid down in Master Circular 10. In case of futureGuidelines of Bangladesh Bank, the up-to-date requirements of reporting to BangladeshBank are to be complied with bKash Limited. Copy of such reports is to be send to theCompliance Team of BRAC Bank Limited. BRAC Bank Limited may request for any otherreports on requirement

10. FIELD COMPLlANCEASSESSMENT REPORT / INDEPENDENT AUDlTREPORTS:bKash Limited will generate quarterly report on the Field Compliance AssessmentInspections conducted under the guidance by the CAMLCO and monitored through theCCC of bKash Limited. bKash Limited will share half yearly Field Compliance AssessmentInspection Report with BRAC Bank Limited . BRAC Bank Limited may also requestcompliance report as and when re quired. bKash Limited may also appoint external auditfirms to carry out audit as per the requirement of bKash Limited. Beside, internal auditofbKash Limited will carry out audit as per the 'Annual Audit Plan'. Additionally. BRACBank Limited Audit Team will also conduct audit at bKash Limited.

11. SECURITYISSUES:bKash Limited shall address the following properties to offer a secure infrastructure forfinancial transactions using mobile technology:a. Confidentiality: Property that ensures transaction information cannot be viewed byunauthorized persons.b. Integrity: Property that the transaction information remains intact duringtransmission and cannot be altered.



c. Autho rization: Property that the authe ntic user has proper permission to perform theparticular transaction. It ensures how the system decides what the user cando.d. Nonrepudiation: Property that the particular transaction initiate d by a user cannot bedenied by himjher later.

All the tra nsactions must be authenticated by the Account holder s using their respectivePerso nal Identification Number (PIN) or similar other secured mechanism. To facilitat ethe MFS, the said PIN may be issued and authenticated by maintaining proper protectionand security features.

11. RECORD KEEPING:BRAC Bank Limited to monitor that the Compliance Organization of bKash Limitedensures that there is adequate system in place to preserve all necessary reco rds ontransactions as per Bangladesh Bank guidelines. BRll,C Bank Limited will also monitorthat bKash Limited Compliance Organization ensures preservation of reco rds oncustomer identification (e.g. copies or records of official identification documents likeNational ID Cards, Passports, Driving Licenses, or any other ID Cards and documentsacceptable by Bangladesh Bank), account fi les and business corr espondence forminimum 6 (six) years even after the account is closed. These documents will beavailable to domestic competent authorities in the context of relevant criminalprosecutions andforinvestigations.

13. CONCLUSION:bKash Limited shall have to follow rules, regulations, guidelines and instru ctions issuedby Bangladesh Bank from time to time and preserve records for BRAC Bank Limitedoversight.


1

Fahad

From: Rais Uddin AhmadSent: Wednesday, October 9, 2019 1:54 PMTo: AllSubject: Very important, must be read: AML/CFT Risk Management Guideline:

Dear Colleagues, As you may know, Bangladesh Financial Intelligence Unit has issue Master Circular 19 and BBL has also updated it’s AML&CFT policy. The amended policy has been uploaded in the bank’s intranet at the link provided below. Summary of the changes is appended below.

Money Laundering & Terrorist Financing Risk Management Guidelines 2019

Revision incorporated more insights on CDD, EDD, KYC, reporting requirements and specific roles by stakeholders.

This policy has been incorporated with modified requirements stated through BFIU Circular No.1p dated September 17, 2017 which replaced Circular 10.

The more specific responsibilities of Central Compliance Committee (CCC) and its secretariat, Anti-Money Laundering Division in order to ensure proper implementation of strategic initiatives to combat ML, TF and PF .

Directives to perform appropriate diligence in wire transfer transactions as per BFIU Circular No. 21: Amendment of Section 9 of BFIU Circular- 19 and enhanced due diligence (EDD) in correspondent banking relationships have been emphasized as per the BFIU Circular No.19 dated September 17, 2017. Considerations pertaining to risk assessment for customers, transaction, delivery channels, and locations have been modified as per requirement.

A clause on verification of ultimate beneficial ownership (UBO) of the accounts has been incorporated in compliance to the international best practices focused by Fourth EU Money Laundering Directive, Section 325 and 326 of USA Patriot ACT, UK Money Laundering Regulations 2007 and FATF Recommendations 24 and 25.

Soft copy of this guideline is available in BBL TOUCH. (BBL TOUCH>>Operations Manual>>Guideline>> BBL Guideline) file://10.5.14.28/R&IC%20Guidelines/BBL%20Giudeline%20&%20Instruction/BRAC%20Bank%20Guideline/ Amendment to the Bank’s HR Policy has been amended to include AML&CFT issues for proper implementation of AML & CFT measures:

2

In addition to the above, to accommodate the requirement of Money Laundering & Terrorist Financing Risk Management Guidelines by Bangladesh Financial Intelligence Unit (BFIU), Bangladesh Bank; “Bank’s HR Policy has been amended to include the following issues for proper implementation of AML & CFT measures:

Proper administrative sanction (proportionate and dissuasive) for non- compliance of AML & CFT measures; Proper weight should be given in the annual performance evaluation of employees for extra ordinary

preventive action vis a vis for non-compliance; Written procedure to recover the fined amount from the concerned employee if the fine imposed on employee

by the BFIU; Other measures that shall be taken in case of non-compliance by the bank.”

In line with the above guideline, the Management proposed to insert the following measures or procedure for Compliance / noncompliance of AML & CFT measures in BRAC Bank’s Employees Terms of Service. This was subsequently approved by the Board of Directors.

1. Compliance / noncompliance of AML & CFT measures

HRD, in coordination with the Anti-Money Laundering Division, will review the compliance / noncompliance of AML & CFT measures at branches & HO departments. AMLD will provide a rating for individual branches & departments as per pre-agreed criteria by January of the following calendar year for consolidation purposes at HR.

In case of any non-compliance/failure identified, the liable employee’s shall be penalized as follows in the immediate Performance Assessment – - Performance Rating will be downgraded by 1 or 2 notch depending on the severity of the case - Values rating will also be rated as “C or D” depending on the severity of the case - HR will take Management approval separately, for each individual case - Performance Bonus amount will be reduced accordingly

Performance Bonus amount will be increased by 20% for taking extra ordinary preventive action by the

employees.

2. In case of Fine Imposed by BFIU

If any fine imposed on Bank; it will be paid by the Bank immediately. Simultaneously, - A proper/formal investigation will be initiated jointly by AMLD & ICC Division - After the completion of the investigation, the final report will be submitted to the Board Audit Committee

for review and onward submission to the Board of Directors. If any employee/s found liable, Board at its discretion fix the fined amount or ratio of the fined amount to be recovered from the employee/s concerned.

- As per previously practice, 20% of the fined amount will be recovered from the liable employees proportionally based on seniority; for branches it will be 50% BM/BAMLCO and 50% from other liable employees.

- For any exception, it will be placed before the Board for its review and final decision

If any fine imposed on individual employee; it has to be paid by the employee concerned. Whereas, considering the scenario, Bank may provide personal loan/Staff loan to assist him/her to pay the fined amount subject to meeting all eligibility criteria to avail the loan.

If you need any clarification, please do not hesitate to talk to your line-manager, HR or AMLD. Thanks & Regards

3

Rais

(Rais Uddin Ahmad) Company Secretary Head of Regulatory Affairs and CAMLCO BRAC Bank Ltd Anik Tower, 220/B Gulshan Tejgaon Link Road Dhaka, Bangladesh Tel # +88029884292(Ext-2028), +88028801266 Swift : BRAKBDDH Web: www.bracbank.com Time zone: UTC +6

MoneyLaundering Terrorist - Brac Bank

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