Bangladesh Struggles to Implement Financial Crime Policies and Procedures

In a recent evaluation, Bangladesh has been found to be struggling with implementing the technical requirements of the Financial Action Task Force (FATF) Recommendations. The country’s efforts to combat financial crime have been deemed insufficient in several key areas.

Key Areas of Concern

One of the major concerns is the lack of effective national cooperation and coordination between different agencies to combat financial crime. The country also failed to establish a clear money laundering offense and lacks provisions for confiscation and provisional measures.

National Cooperation and Coordination: The FATF Recommendations require countries to establish effective national cooperation and coordination to combat financial crime.
Money Laundering Offense: A clear money laundering offense is essential to prevent and prosecute money laundering activities.
Confiscation and Provisional Measures: Provisions for confiscation and provisional measures are necessary to freeze and seize assets related to financial crimes.

Bangladesh’s efforts to combat terrorist financing have been deemed inadequate, with the country failing to establish a targeted financial sanctions regime related to terrorism and terrorist financing. The country also lacks effective regulations and supervision of non-profit organizations and financial institutions secrecy laws.

Other Areas of Concern

The evaluation team also found that Bangladesh has failed to implement effective customer due diligence and record-keeping requirements. The country’s correspondent banking regime and money or value transfer services are also deemed inadequate.

Customer Due Diligence: Effective customer due diligence is necessary to identify and verify the identity of customers.
Record-Keeping Requirements: Record-keeping requirements are essential to maintain accurate records of financial transactions.
Correspondent Banking Regime: A correspondent banking regime is necessary to ensure that banks have adequate procedures in place to manage high-risk correspondent relationships.
Money or Value Transfer Services: Money or value transfer services require effective regulations and supervision to prevent money laundering and terrorist financing.

Bangladesh’s reliance on third parties for regulatory oversight has been criticized, as well as its lack of effective internal controls and foreign branches and subsidiaries. The country’s approach to higher-risk countries has also been deemed insufficient.

Some Progress Made

Despite these significant concerns, the evaluation team noted that Bangladesh has made some progress in areas such as reporting suspicious transactions, tipping-off and confidentiality, and transparency and beneficial ownership of legal persons.

Reporting Suspicious Transactions: Reporting suspicious transactions is essential to prevent and detect financial crimes.
Tipping-Off and Confidentiality: Tipping-off and confidentiality requirements are necessary to maintain the integrity of financial intelligence.
Transparency and Beneficial Ownership of Legal Persons: Transparency and beneficial ownership of legal persons require effective regulations and supervision.

The country’s financial intelligence unit (FIU) has been established, but its effectiveness is still being assessed. The evaluation team also noted that Bangladesh has taken steps to improve its regulatory and supervisory framework, including the establishment of a new regulator for non-bank financial institutions.

Recommendations

To address the weaknesses identified in this mutual evaluation, Bangladesh is recommended to:

Establish a Clear Money Laundering Offense: Establish a clear money laundering offense and provisions for confiscation and provisional measures.
Improve National Cooperation and Coordination: Improve national cooperation and coordination between different agencies to combat financial crime.
Enhance Regulations and Supervision: Enhance regulations and supervision of non-profit organizations and financial institutions secrecy laws.
Implement Effective Customer Due Diligence: Implement effective customer due diligence and record-keeping requirements.
Strengthen Correspondent Banking Regime: Strengthen correspondent banking regime and money or value transfer services.

The FATF will continue to monitor Bangladesh’s progress in addressing these weaknesses and will provide guidance and feedback to the country.