AML & CFT compliance: building block of MFS industry

| Updated: June 22, 2022 21:00:15

AML & CFT compliance: building block of MFS industry

During a disaster, the best traits of humanity often come out to forefront. After the recent Chottogram fire incident, several humanitarian organisations have been raising money for the benefit of the affected families. The initiatives to help the affected in such a dire time has been strengthened by the usage of social media, as well as the ubiquitous presence of Mobile Financial Services (MFS).

In June 2022, Bangladesh Financial Intelligence Unit (BFIU) is celebrating '20 years of Glorious Journey - The Strongest Building Block of AML & CFT Regime'. As an MFS provider and a Reporting Organisation (RO) of BFIU, bKash Limited is conducting 'AML & CFT Week' to express solidarity with the initiative of BFIU with a view to fostering AML & CFT practice in the MFS industry of Bangladesh.

The growth of MFS would be quite unimaginable ten years ago. Back in 2009-2010, Bangladesh was merely considered as a critical testing ground where MFS might or might not reach its full potential. How would a common citizen remember a PIN number to operate? How would the digital literacy be grasped by the common people? Apart from these fundamental questions, what cluttered the minds of the potential practitioners as well as the regulators was the burning issue of compliance. Especially in case of MFS that serves millions of customers, compliance practice is a must, as the risk of non-compliance is significantly higher than any other industry.

The adaptation of MFS and the ever-evolving regulatory landscape portrays the parallel growth of compliance practice and awareness among the users in Bangladesh. Although MFS started as a solution to the problem of a significant number of citizens living outside the formal economy (unbanked and underbanked), today MFS is being used by customers from all walks of life.

As MFS providers deal with funds of customers from different backgrounds, keeping their platforms risk-free through stringent, standardised, and unwavering compliance policies is a must. In Bangladesh, all MFS providers operate within the regulatory framework and guidelines provided by Bangladesh Bank and BFIU. The notable ones are-- Bangladesh Mobile Financial Services (MFS) Regulations, 2022, BFIU Circular-20 and BFIU Circular-25. BFIU, through the mentioned guidelines have provided clarity on the expected AML & CFT measures to be carried out by the MFS providers. Therefore, strict and uniform implementation of the regulatory directives and guidelines by all the providers will help to keep the service platforms secure.

The decade-long implementation of regulatory directives has made KYC (Know Your Customer), CDD (Customer Due Diligence) and STR (Suspicious Transaction Report)/SAR (Suspicious Activity Report) the centre pieces of compliance practices. As per BFIU guidelines, while on-boarding customers, agents and merchants, it is the responsibility of the providers to collect correct and complete information of the person/organisation being on-boarded. For many years, the KYC process has been paper-based. However, matching with the fast pace of digitisation in Bangladesh, BFIU has introduced the digital KYC or e-KYC directives through Circular 25, where a maker-checker-approver process has been meticulously outlined. Ensuring proper e-KYC through face-to-face interaction/matching remains the sole responsibility of the MFS provider. Any registration process short of the defined steps of Circular 25 shall not only be violation of compliance, rather would jeopardize fundamental norm of registration process of financial accounts.

The citizens of Bangladesh can enjoy a variety of services from different providers, but they are allowed to maintain only one account with one provider. Registering more than one account for an individual by a particular MFS provider would inevitably lead to non-traceability of the actual owner in case of financial transactions connected to crimes and fraudulent incidents. Besides, multiple accounts against one NID can very easily enable criminals to breach the limits given by the regulator and use these accounts for laundering money.

According to AML & CFT guidelines, all MFS providers must carry out sanction screening as part of Customer Due Diligence (CDD). The regulatory directives forbid the persons listed in the UN Security Council Sanction list including relevant global and national sanction lists from opening MFS accounts in Bangladesh. As per the requirements of e-KYC, sanction screening is not possible without NID verification/facial matching. Hence, the shortcut method of account registration grossly violates the need of sanction screening. At the same time, without proper sanction screening, no remittance transaction should take place as that poses a great risk of money laundering/terrorist financing. bKash carries out periodic screening of the entire customer base and instant screening of both sender and recipient of inward foreign remittance as per the instructions provided by BFIU Circular- 20.

In this ever-evolving industry, an MFS provider must assess all aspects to mitigate the ML & TF risks. During the development phase of each new product or service, appropriate risk assessment must be conducted by the provider and subsequently reviewed by BFIU. On top of this, a strong field force is a must to battle the ML/TF risk in the MFS ecosystem. Field compliance assessments help the providers physically monitor the channel partners (such as agents, distributors, and merchants) across the country. As per regulatory directives, Regional Anti Money Laundering Compliance Officer (RAMLCO) is a requirement that must be fulfilled by all MFS providers.

MFS providers deal with the fund of customers. Therefore, growth target should never conflict with customer fund protection. Negligence from any provider in mitigating ML & TF risks will lead to customers losing faith in the entire industry.

The meteoric rise of the MFS industry in Bangladesh has been made possible by the continuous hard work of the providers and the guidance of the regulator. MFS is now a strong pillar of the financial system of Bangladesh. As we are celebrating the 20 Years of Glorious Journey of BFIU in combating ML & TF risks, we should renew our pledge to keep our platform risk-free, convenient and compliant as always for continued success of the MFS sector in the coming days.


Major General Sheikh Md Monirul Islam (retd), Chief External & Corporate Affairs Officer of bKash

[email protected]

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