Myanmar’s Directive No. 4/2022: Guidelines for Microfinance Institutions to Combat Money Laundering and Terrorism Financing
In a bid to curb money laundering and terrorism financing, the Myanmar government has issued Directive No. 4/2022, outlining strict guidelines for microfinance institutions (MFIs) operating in the country.
Low-Risk Factors for MFIs
According to the directive, low-risk factors for MFIs include:
- Domestic and foreign borrowing
- Acceptance of savings from members
However, MFIs must still be vigilant and implement robust risk management strategies to prevent financial crimes.
Membership Acceptance Policy
The directive requires senior management teams to establish and apply a membership acceptance policy that excludes individuals and entities deemed to be high-risk, including:
- Members with criminal records or links to terrorist organizations
- Individuals from countries with high rates of terrorism or corruption
- Perpetrators of certain offenses deemed to pose a high risk of money laundering and/or terrorism financing
Risk-Based Strategy
MFIs must classify members as high, medium, or low-risk based on:
- Personal information
- Financial behavior
- Country of residence
The directive also emphasizes the importance of continuous monitoring and reporting of suspicious activities.
Managing Geographic Risks
MFIs must be aware of the nature and purpose of businesses operating in high-risk areas, including countries with high rates of terrorism or corruption. They must also:
- Verify the level of risk associated with cash-based businesses
- Identify inconsistencies during the initial communication period
Risk Management for Product/Service Distribution Channels
The directive requires MFIs to strictly conduct verification checks on members using non-face-to-face service delivery channels, including digital financial services.
Particulars on High-Risk Countries
MFIs must:
- Continuously obtain information related to high-risk countries
- Verify shareholders from such countries
- Understand the nature and purpose of activities conducted with members from high-risk countries
- Perform enhanced due diligence functions
Risk Management for Terrorism Financing
The directive emphasizes the importance of maintaining controls on money laundering and terrorist financing, conducting risk assessments, and monitoring suspicious activities. MFIs must also:
- Coordinate with the Financial Intelligence Unit (FIU) and other supervisory authorities to prevent financial crimes
Consequences for Non-Compliance
MFIs that fail to comply with the provisions of Directive No. 4/2022 shall be prosecuted under the Microfinance Law, Anti-Money Laundering Provisions Law, and Anti-Terrorism Law.
In conclusion, Myanmar’s directive aims to strengthen the country’s anti-money laundering and anti-terrorism financing framework by providing guidelines for MFIs to manage risks and prevent financial crimes.