Financial Crime World

Myanmar Banks Face Tougher Compliance Regulations in Financial Sector

YANGON, MYANMAR - The financial landscape of Myanmar has undergone significant changes following the implementation of the Financial Institutions Law (FIL) and various anti-money laundering (AML) regulations.

Stricter Compliance Regulations for Banks and Non-Bank Financial Institutions

The FIL and AML regulations have brought about stricter compliance requirements for banks and non-bank financial institutions (NBFIs) operating in Myanmar. These regulations are aimed at ensuring transparency, preventing illicit activities, and promoting a stable and secure financial sector.

Key Requirements

  • All banks, NBFIs, and financial holding companies must obtain a license from the Central Bank of Myanmar (CBM) to operate.
  • Minimum capital adequacy ratios have been set for different types of institutions, attracting foreign investment and promoting financial inclusion.

Anti-Money Laundering Regulations

Myanmar banks are required to comply with AML regulations to prevent money laundering and financing of terrorism. KBZ Bank, one of the largest banks in Myanmar, must adhere to the provisions of the Anti-Money Laundering Law 2014 and implement effective AML/CTF programs.

  • Conduct regular risk assessments
  • Establish a comprehensive know-your-customer (KYC) process
  • Implement transaction monitoring mechanisms
  • Report suspicious transactions to the Financial Intelligence Unit (FIU)

Risk Management Frameworks

The CBM has issued guidelines for banks to develop effective frameworks and practices to manage their money laundering/terrorist financing risks. Banks are required to have a comprehensive risk management process in place, including:

  • Identifying, measuring, evaluating, monitoring, reporting, and controlling material risks on a timely basis
  • Adopting internal policies, procedures, systems, and controls to combat money laundering and terrorism financing

Customer Due Diligence

The CBM has also issued directives on customer due diligence (CDD) for banks licensed and supervised by it. Banks must:

  • Conduct enhanced CDD measures for occasional transactions exceeding a certain threshold
  • Adopt internal policies, procedures, systems, and controls to combat money laundering and terrorism financing

Risk Management Guideline

The CBM has introduced a Guideline on Risk Management Practices of Banks, requiring banks to establish a comprehensive risk management system overseen by their board of directors. The guideline defines seven key financial risks that banks must identify, measure, monitor, and control:

  • Credit risk
  • Market risk
  • Liquidity risk
  • Operational risk
  • Legal risk
  • Regulatory risk
  • Reputational risk

Implementation and Impact

The implementation of these regulations has brought about significant changes in the way Myanmar banks operate. Banks are now required to be more transparent and accountable, enhancing trust and confidence in the financial system.

The CBM will continue to monitor and supervise banks to ensure compliance with these regulations, promoting a stable and secure financial sector in Myanmar.