Myanmar Banking Industry Compliance Regulations Tightened Up
Shaping Myanmar’s Financial Sector with the Financial Institutions Law (FIL) of 2016
The Financial Institutions Law (FIL) of 2016 has played a crucial role in shaping Myanmar’s financial sector, attracting foreign investment and promoting financial inclusion. The law applies to banks, non-bank financial institutions (NBFIs), and financial holding companies (FHCs), excluding insurance companies, microfinance institutions, and cooperatives.
Anti-Money Laundering Law 2014: Prohibiting Money Laundering, Financing of Terrorism, and Predicate Offenses
Under the Anti-Money Laundering Law 2014, money laundering, financing of terrorism, and predicate offenses such as drug trafficking, corruption, and fraud are prohibited. KBZ Bank must adhere to the provisions of the law by implementing effective anti-money laundering and combating the financing of terrorism (AML/CFT) programs.
Central Bank of Myanmar Directives on AML/CFT
The Central Bank of Myanmar directs banks to develop frameworks and practices to manage money laundering and terrorist financing risks, in line with Basel Core Principles for Effective Banking Supervision and Financial Action Task Force 40 Recommendations. The bank must have a comprehensive risk management process to:
- Identify material risk
- Measure and evaluate the risk
- Monitor and report on the risk
- Control and mitigate the risk
Customer Due Diligence (CDD) Directives
The Central Bank of Myanmar also issues directives on customer due diligence (CDD) related to anti-money laundering and counter-financing of terrorism. Banks licensed by the CBM must:
- Adopt internal policies, procedures, systems, and controls to combat money laundering and terrorism financing
- Maintain records of all customer information and transactions for a specific period as mandated by the AML Law
Risk Management Guidelines
The Central Bank of Myanmar has issued guidelines on risk management practices for banks, which require them to establish a comprehensive risk management system overseen by their Board of Directors. The seven key financial risks defined in the guideline include:
- Credit risk
- Market risk
- Liquidity risk
- Operational risk
- Legal risk
- Regulatory risk
- Reputational risk
The bank’s objectives are to ensure its risk management system is appropriate for its business, enhance risk management practices, and set out standards used by the CBM in assessing risk management systems under its risk-based approach to supervision.