Financial Crime World

Myanmar Added to FATF’s List of Jurisdictions Subject to a Call for Action: What it Means for KYC Due Diligence

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The Financial Action Task Force (FATF) has added Myanmar to its list of jurisdictions subject to a call for action, as reported at its recent plenary meeting. This development is likely to have significant implications for banks and companies operating in the country, particularly with regards to Know Your Customer (KYC) due diligence.

What is the FATF?

The FATF is an inter-governmental body that works to generate political will to bring about national legislative and regulatory reforms in the areas of prevention of money laundering and terrorism financing. The organization has published several sets of recommendations and standards since 2012, including the International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation.

What does it mean for Myanmar?

According to the FATF, Myanmar should demonstrate an improved understanding of money laundering risks in key areas, as well as enhanced use of financial intelligence in law enforcement agency investigations. The country is also expected to increase operational analysis and dissemination by its Financial Intelligence Unit (FIU) and ensure that money laundering is investigated and prosecuted in line with risks.

Practical Implications

  • Myanmar banks and companies can expect to liaise with their international counterparts to provide more detailed information about customers, business relationships, sources of funds, and other relevant details.
  • This may require additional time for cross-border transfers and could have significant implications for planning and budgeting purposes.

FATF Standards and Recommendations

The FATF’s standards and recommendations are designed to combat money laundering, terrorism financing, and the proliferation of weapons of mass destruction. Section 19 of these standards requires financial institutions to apply enhanced due diligence measures to business relationships and transactions with natural and legal persons from countries subject to a call for action.

Enhanced Due Diligence Measures

  • The type of enhanced due diligence measures applied should be effective and proportionate to the risks.
  • When applying enhanced due diligence measures, countries should ensure that flows of funds for humanitarian assistance, legitimate non-profit activity, and remittances are not disrupted.

Central Bank’s Clarification

The Central Bank of Myanmar has sought to clarify the situation, noting that the country’s designation level is different from that of Iran and Democratic People’s Republic of Korea (DPRK), which are subject to a call to apply counter-measures. The bank also emphasized that Myanmar has already achieved 24 recommendations out of 40 set by FATF and has established an appropriate action plan.

Conclusion

The addition of Myanmar to the FATF’s list of jurisdictions subject to a call for action is likely to have significant implications for banks and companies operating in the country, particularly with regards to KYC due diligence. As the situation continues to unfold, it will be important for financial institutions to remain vigilant and take steps to comply with the FATF’s requirements.