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Myanmar Financial Institutions Embrace Stringent Security Measures to Combat Money Laundering and Terrorism Funding

In a bid to curb the menace of money laundering and terrorism funding, Myanmar’s financial institutions have stepped up their security measures. The country’s Financial Institutions Law (FIL) 2016 has played a pivotal role in reforming and developing its financial sector, attracting foreign investment and promoting financial inclusion.

Overview of the Financial Institutions Law

According to the FIL, all banks, non-bank financial institutions (NBFIs), and financial holding companies (FHCs) are required to obtain licenses from the Central Bank of Myanmar (CBM). The law also specifies minimum capital adequacy ratios for different types of institutions. Furthermore, insurance companies, microfinance institutions, and cooperatives are exempt from the FIL’s regulations.

Anti-Money Laundering and Combating Financing of Terrorism

Money laundering, including concealment, acquisition, conversion, or use of illegally obtained funds, as well as financing of terrorism and predicate offenses such as drug trafficking, corruption, and fraud, are strictly prohibited under Myanmar’s Anti-Money Laundering Law 2014. KBZ Bank, for instance, must adhere to the provisions of the law and implement effective anti-money laundering (AML) and combating the financing of terrorism (CFT) programs.

Security Measures Implemented by KBZ Bank

The bank is required to conduct regular risk assessments, establish a comprehensive know-your-customer (KYC) process, implement transaction monitoring mechanisms, and report suspicious transactions to the Financial Intelligence Unit. KBZ also maintains adequate records of all customer information and transactions for a specified period.

Central Bank of Myanmar’s Directives

In addition, the CBM has directed all banks to develop effective frameworks and practices to manage their money laundering/terrorist financing risks. The banks are required to have a comprehensive risk management process in place, including effective board and senior management oversight, to identify, measure, evaluate, monitor, report, and control material risks on a timely basis.

Customer Due Diligence (CDD) Directive

The CBM has also issued the Directive on Customer Due Diligence (CDD) related to AML/CFT. Banks are required to adopt, develop, and implement internal policies, procedures, systems, and controls to combat money laundering and terrorism financing. Enhanced CDD measures must be undertaken when carrying out occasional transactions with customers who have no established relationship with the bank if the transaction amount exceeds a certain threshold.

Risk Management Practices of Banks

Furthermore, the CBM has issued the Guideline on Risk Management Practices of Banks, which requires banks to establish a comprehensive risk management system overseen by their Board of Directors. The guideline defines seven types of key financial risks and sets out objectives for ensuring that banks’ risk management systems are appropriate to their business.

Conclusion

The implementation of these security measures is crucial in preventing the misuse of Myanmar’s financial system and maintaining the country’s economic stability.