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MFIs Must Implement Effective Risk Management Strategies
Yangon, Myanmar - In a move to strengthen the country’s anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations, the Microfinance Directive No. 4/2022 has been issued by the relevant authorities.
The directive emphasizes the importance of implementing effective risk management strategies by microfinance institutions (MFIs) in Myanmar. The MFIs are required to:
- Identify high-risk factors
- Communicate regularly with senior management and law enforcement agencies
- Maintain an updated information management system
Sources of Risk
According to the directive, high-risk factors include: * Members who have attempted abuse in the past * Those who join through intermediaries * Individuals from countries with high rates of terrorist activity Medium-risk activities include: * Members involved in risk classes * Financial transactions above reported amounts * Grant applications from local or foreign donors
Membership Acceptance Policy
The directive outlines strict rules for establishing and applying membership acceptance policies. MFIs must not accept members who are deemed to be: * A criminal or member of a criminal group * A terrorist * Have a history of criminal activity
Risk-Based Strategy
MFIs must classify their members as high, medium, or low risk based on: * Personal information * Financial behavior * Country of residence The institutions must also conduct customer due diligence (CDD) and enhanced due diligence (EDD) as necessary to prevent risk-based problems.
Country Risk Assessment
The directive requires MFIs to continuously obtain information about high-risk countries from the Compliance Officer and verify shareholders from such countries. When conducting business with members from high-risk countries, the MFIs must: * Fully understand the nature and purpose of the activity * Perform EDD functions
Terrorism Financing Risk Management
MFIs must maintain controls on money laundering and terrorist financing, process risk assessment, and monitor suspicious activities. The Compliance Officer is responsible for identifying sources of information related to terrorism financing and submitting reports to the relevant authorities.
Consequences of Non-Compliance
MFIs that fail to comply with the provisions of the directive will be prosecuted under: * Microfinance Law * Anti-Money Laundering Provisions Law * Anti-Terrorism Law
The Myanmar government has emphasized the importance of implementing effective risk management strategies to prevent money laundering and terrorism financing. MFIs are urged to familiarize themselves with the directive and implement the necessary measures to ensure compliance.
Source: DFDL Myanmar Contact: myanmar@dfdl.com