Banks’ Strict KYC Procedures Leave NGOs in Limbo, Risking Humanitarian Crisis

Stricter KYC Rules Cause Delays and Disruptions for NGOs in Myanmar

YANGON - A stringent Know Your Customer (KYC) procedure enforced by banks on non-governmental organizations (NGOs) in Myanmar has created a humanitarian crisis, leaving millions of people in need without access to basic services. The State Administrative Council (SAC) has suspended NGO registration processes indefinitely, while the government tightens KYC standards for formal and informal financial services.

“De-Risking” Nightmare

As a result, NGOs are struggling to obtain registrations, leading to delays, stops, freezes, or recalls of transactions. Industry experts describe this situation as a “de-risking nightmare,” where banks are concerned about being in breach of Anti-Money Laundering/Combating the Financing of Terrorism (AML/CTF) duties if they continue banking with NGOs with expired or invalid registrations.

Impact on Humanitarian Operations

The situation has led to a severe impact on humanitarian operations, with NGOs unable to access formal and informal financial services. Many have been shut out of the formal banking system, relying on alternative methods such as hundi, an informal value transfer system. This has caused delays and disruptions in the delivery of essential aid, exacerbating the already dire situation in Myanmar.

FATF Blacklisting Could Exacerbate Crisis

The Financial Action Task Force (FATF) blacklisting of Myanmar would further complicate the situation, making it even more challenging for NGOs to operate in the country. The blacklisting would add onerous due diligence requirements for international financial transfers with Myanmar financial institutions, further restricting access to funding and resources.

Urgent Calls for Action

NGOs are urging FATF Member States to reconsider the listing of Myanmar as a “high-risk jurisdiction” and to adopt a risk-based approach that prioritizes humanitarian needs over strict KYC standards. They are also calling on banks to recognize and enable both formal and informal financial aid modalities in Myanmar, avoiding de-banking and financial exclusion.

A Balanced Approach Needed

The situation highlights the need for a balanced approach that prioritizes humanitarian needs while ensuring financial integrity. Failure to do so could have devastating consequences, leaving millions of people in need without access to basic services such as food, shelter, health, and education. FATF is urged to review its due diligence requirements and issue additional guidance to ensure a proportionate response that respects international human rights principles and due process norms.

Conclusion

The strict KYC procedures enforced by banks on NGOs in Myanmar have created a humanitarian crisis, leaving millions of people without access to basic services. It is essential for governments, financial institutions, and regulatory bodies to work together to find a balanced solution that prioritizes humanitarian needs while ensuring financial integrity.