Financial Crime World

Tougher KYC Diligence Regulations for Microfinance Institutions in Myanmar

The Myanmar Microfinance Business Supervisory Committee has issued Directive No. 4/2022 to strengthen anti-money laundering (AML) and combating the financing of terrorism (CFT) measures in Myanmar’s microfinance sector.

Background

The directive aims to enhance AML/CFT measures in the country’s microfinance sector, which is crucial for maintaining financial stability and preventing illegal activities such as money laundering and terrorist financing.

Key Requirements

The directive requires licensed microfinance institutions (MFIs) to implement robust risk-based management systems to identify and mitigate AML/CFT risks. The regulations apply not only to MFIs but also to their members, including:

  • Individuals
  • Organizations
  • Companies participating in the MFI’s operations

Some key requirements include:

  • Formulating policies and procedures for implementing AML/CFT processes
    • Identifying and evaluating AML/CFT-related risks
    • Monitoring member activities
    • Reporting suspicious transactions
    • Maintaining records
    • Conducting regular reviews
  • Adopting a risk-based strategy to classify member risks as high, medium, or low based on:
    • Personal information
    • Financial behavior
    • Country of residence
    • Other factors
  • Evaluating AML/CFT risks related to non-citizen members and clients, particularly those from countries identified as high-risk

Responsibilities of MFI Management Teams

MFI management teams are responsible for ensuring employee compliance with AML/CFT policies and procedures. They must:

  • Establish a monitoring system to check whether the MFI effectively implements AML/CFT policies and procedures
  • Provide regular training on AML/CFT to employees

High-Risk Companies and Structures

The directive specifies that companies and structures considered high-risk include those with:

  • Undisclosed beneficiaries
  • Unregistered companies without disclosed beneficial owners
  • Businesses providing financial services, real estate agencies, gemstone traders, and others

Additional Requirements

MFIs must also:

  • Maintain comprehensive risk management policies
  • Monitor employee training on AML/CFT
  • Report suspicious activities to the Myanmar Financial Intelligence Unit (FIU)
  • Emphasize transparency in communication with employees and provide guidelines for effective AML/CFT risk management

By implementing these regulations, MFIs can demonstrate their commitment to combating money laundering and terrorist financing while maintaining a secure and stable financial environment.