Financial Crime World

Myanmar Microfinance Directive No. 4/2022: New Rules for Donors and Organizations

The Microfinance Directive No. 4/2022 has introduced new regulations for donors and organizations operating in Myanmar’s microfinance sector. The directive aims to prevent money laundering and terrorist financing by setting strict guidelines for membership acceptance policies, risk-based strategies, and geographic risks.

New Regulations for Donors and Organizations

According to the directive, low-risk factors include:

  • Domestic and foreign borrowing
  • Acceptance of savings from members

However, high-risk factors include:

  • Accepting members who are criminals or have a history of criminal activity, particularly those from countries with high rates of terrorist activity.

Classification of Members

Microfinance institutions (MFIs) must classify their members into three categories: high, medium, and low risk based on:

  • Personal information
  • Financial behavior
  • Country of residence

Enhanced Due Diligence for High-Risk Members

To mitigate risks, MFIs must conduct:

  • Customer due diligence (CDD)
  • Enhanced due diligence (EDD) for high-risk members, including:
    • Screening for politically exposed persons (PEPs)
    • Corporate bodies connected with trusts or special mechanisms
    • Businesses providing financial services

Monitoring and Reporting Suspicious Activities

MFIs must:

  • Monitor suspicious activities
  • Report to the Financial Intelligence Unit (FIU)
  • Submit Suspicious Transaction Reports (STRs) when necessary

Failure to comply with the provisions of the directive can result in prosecution under:

  • Microfinance Law
  • Anti-Money Laundering provisions Law
  • Anti-Terrorism Law

Employee Training and Awareness

The directive emphasizes the importance of providing knowledge and training to employees on anti-money laundering and combating the financing of terrorism (AML/CFT) procedures. MFIs must ensure that their employees understand:

  • The risks associated with money laundering and terrorist financing
  • How to identify and report suspicious activities

Conclusion

Donors and organizations operating in Myanmar’s microfinance sector are advised to carefully review the directive and comply with its provisions to avoid any legal consequences.