Financial Crime World

COMPLIANCE RISKS IN BANKING IN BANGLADESH: REGULATORY FRAMEWORK AND GUIDELINES

The banking sector in Bangladesh has undergone significant reforms and regulations to ensure stability, security, and soundness. The central bank of the country, Bangladesh Bank (BB), plays a crucial role in regulating and supervising commercial banks, financial institutions, and non-bank financial institutions (NBFIs). This article provides an overview of the regulatory framework and guidelines related to compliance risks in banking in Bangladesh.

Regulatory Framework

Bangladesh has a comprehensive regulatory framework for the banking sector, which includes:

Prudential Regulations

  • BB issues prudential regulations to ensure that banks maintain adequate capital, liquidity, and risk management practices.
  • These regulations aim to prevent bank failures and ensure the stability of the financial system.

Financial Institutions Act (FIA)

  • The FIA provides a legal framework for financial institutions, including commercial banks, NBFIs, and insurance companies.
  • This act regulates the operations of these institutions and ensures that they comply with the regulatory requirements.

Bangladesh Bank Order (BBO)

  • The BBO empowers BB to regulate and supervise the banking sector.
  • This order gives BB the authority to issue regulations, guidelines, and directives to ensure compliance with the regulatory framework.

Compliance Risks Guidelines

BB has issued various guidelines to address compliance risks in the banking sector, including:

Anti-Money Laundering (AML) and Combating Financing of Terrorism (CFT)

  • These guidelines aim to prevent money laundering and terrorist financing activities.
  • They require banks and financial institutions to implement effective AML/CFT controls.

Risk Management Guidelines

  • BB has issued risk management guidelines for banks, financial institutions, and NBFIs to ensure effective risk management practices.
  • These guidelines require institutions to identify, assess, and manage risks in a timely manner.

Guidelines on Internal Control and Compliance

  • These guidelines provide a framework for internal control and compliance in banks and financial institutions.
  • They aim to ensure that institutions have effective controls in place to prevent non-compliance.

Asset-Liability Management (ALM) Guidelines

  • ALM guidelines help banks manage their assets and liabilities effectively.
  • They require banks to maintain a balance between their assets and liabilities to ensure stability and security.

Foreign Exchange Guidelines

BB has also issued foreign exchange guidelines to regulate foreign exchange transactions, including:

Foreign Exchange Transactions Guidelines

  • These guidelines provide a framework for foreign exchange transactions, including spot and forward transactions.
  • They require banks to maintain accurate records of foreign exchange transactions.

Guidelines on International Factoring

  • BB has issued guidelines on international factoring to facilitate trade finance activities.
  • These guidelines aim to promote the use of factoring in international trade.

Payment and Settlement Systems

BB has established payment and settlement systems to ensure efficient and secure payment processing, including:

Bangladesh Automated Cheque Processing System (BACPS)

  • BACPS provides a platform for cheque clearing and settlements.
  • This system enables fast and secure payment processing.

Real-Time Gross Settlement (RTGS) System

  • The RTGS system enables same-day settlements of large-value transactions.
  • It ensures timely and accurate payment processing.

National Financial Inclusion Strategy

BB has implemented the National Financial Inclusion Strategy to promote financial inclusion in Bangladesh, including:

Mobile Financial Services Regulations

  • These regulations provide a framework for mobile banking services.
  • They aim to promote the use of mobile banking for financial inclusion.

Agent Banking Guidelines

  • BB has issued guidelines on agent banking to facilitate access to financial services.
  • These guidelines aim to promote the use of agent banking in rural and underserved areas.

In conclusion, the regulatory framework and guidelines related to compliance risks in banking in Bangladesh are comprehensive and aimed at ensuring stability, security, and soundness of the banking sector.