Financial Crime World

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Myanmar’s Financial Institutions Face New Risk Management Challenges

In a move aimed at strengthening anti-money laundering (AML) and combating the financing of terrorism (CFT) measures in Myanmar, the country’s Microfinance Business Supervisory Committee issued Directive No. 4/2022 on September 13, 2022.

Applicability and Objectives

The directive applies to licensed microfinance institutions (MFIs), their members, and employees, as well as banks and financial institutions that deal with MFIs. The aim is to ensure that these entities implement effective AML/CFT processes required by the government, thereby strengthening anti-money laundering and combating terrorism financing measures in Myanmar’s financial sector.

Key Requirements

The directive sets out several key requirements for microfinance institutions, including:

  • Formulating policies and preparing procedures to identify and evaluate AML/CFT-related risks arising from their activities
  • Recognizing information about members, monitoring transactions, reporting suspicious activities, maintaining records, and formulating policies for existing members and service distribution channels
  • Ensuring employees comply with AML/CFT policies and procedures
  • Establishing effective compliance practices
  • Monitoring the effectiveness of policies and procedures
  • Identifying risk factors, establishing a monitoring system, and providing training on AML/CFT to relevant employees

Responsibilities of Management Teams

Management teams are responsible for:

  • Ensuring employees comply with AML/CFT policies and procedures
  • Establishing effective compliance practices
  • Monitoring the effectiveness of policies and procedures
  • Identifying risk factors, establishing a monitoring system, and providing training on AML/CFT to relevant employees

Responsibilities of Compliance Officers

Compliance officers are responsible for:

  • Verifying information received from employees
  • Submitting suspicious reports to the Myanmar Financial Intelligence Unit (FIU)
  • Assisting management in developing a culture of effective AML/CFT compliance
  • Maintaining comprehensive risk management policies

Risk-Based Strategy

The directive requires MFIs to adopt a risk-based strategy, classifying members as high, medium or low risk based on personal information and financial behavior. The MFI must also evaluate AML/CFT risks for non-citizen members and clients, considering factors such as the Corruption Perception Index, financial information, and information provided by competent authorities.

High-Risk Companies

High-risk companies identified in the directive include those with:

  • Undisclosed beneficiaries
  • Unregistered companies that do not require beneficial owner disclosure
  • Businesses providing financial services

Conclusion

The implementation of this directive is expected to strengthen AML/CFT measures in Myanmar’s financial sector, helping to prevent money laundering and terrorist financing activities.