Financial Crime World

Banks Apply Stricter KYC Procedures to NGO Clients, Restricting Aid Flow

In a move that has raised concerns among non-governmental organizations (NGOs), banks in Myanmar are implementing stricter Know Your Customer (KYC) procedures for their NGO clients, citing Anti-Money Laundering/Combating the Financing of Terrorism (AML/CTF) duties.

Consequences on Aid Flow

As a result, many NGOs have been unable to obtain registrations from the State Administrative Council (SAC), leading to delays, stoppages, and even recalls of transactions. This situation has resulted in many NGOs being shut out of the formal banking system, making it difficult for them to carry out their critical programming.

Challenges in Conflict-Affected Areas

The NGOs’ inability to access financial services is particularly challenging in conflict-affected areas where formal banking options are limited or unavailable. In these regions, informal financial systems such as hundis and mobile financial modalities are often used by humanitarian actors to reach communities in need.

However, the tightening of KYC procedures for these mechanisms has made it even more difficult for NGOs to access them. The situation is further complicated by the prospect of Myanmar being blacklisted by the Financial Action Task Force (FATF), which would require international financial institutions to implement enhanced due diligence measures.

Bureaucratic and Administrative Impediments

In addition to the challenges posed by KYC procedures, NGOs in Myanmar are facing a range of bureaucratic and administrative impediments. These include:

  • Lack of registration and Memoranda of Understanding (MoUs): The suspension of NGO registration processes has made it difficult for organizations to access banking and financial services.
  • NGO Association Registration Law reforms: The proposed amendment to the law could further restrict NGO operations in Myanmar.
  • Arbitrarily imposed financial regulations: NGOs are being subjected to arbitrary financial regulations, exposing individual staff members to heightened safety and security risks.

Call to Action from FATF Member States

In light of the devastating humanitarian impact of blacklisting on 14.4 million people in need in Myanmar, a call has been made to FATF member states to reconsider the listing of Myanmar as a “high-risk jurisdiction.” The request is also made for FATF to review its due diligence requirements and issue additional guidance as appropriate.

Furthermore, FATF is urged to refrain from compelling states like Myanmar to adopt measures that may jeopardize or curtail legitimate NGO operations. It is recommended that FATF act in line with the risk-based approach set out in its recommendations on non-profit organizations and the role of financial intelligence units.

Public Statement Request

In addition, a public statement emphasizing the need for preserving and protecting legitimate NGO activities is being requested. This would help ensure continuity of urgent life-saving aid delivery to the people of Myanmar.