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APG Mutual Evaluation of Bangladesh - 2016

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An assessment of the anti-money laundering (AML) / counter-terrorist financing (CFT) measures in place in Bangladesh: ratings, key findings and priority actions.

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APG Mutual Evaluation of Bangladesh - 2016

  1. 1. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 1 Anti-money laundering and counter- terrorist financing (AML/CFT) measures in Bangladesh Fourth Round Mutual Evaluation Key findings, ratings and priority actions October 2016 www.fatf-gafi.org/publications/mutualevaluations/documents/mer-bangladesh-2016.html
  2. 2. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 Ratings – Effectiveness (1/3) 2 Immediate outcome of an effective system to combat money laundering (ML) and terrorist financing (TF) Extent to which Bangladesh has achieved this objective 1. ML and TF risks are understood and, where appropriate, actions co-ordinated domestically to combat ML and TF Moderate 2. International co-operation delivers appropriate information, financial intelligence, and evidence, and facilitates action against criminals and their assets Substantial 3. Supervisors appropriately supervise, monitor and regulate financial institutions and designated non-financial businesses and professions (DNFBPs) for compliance with AML/CFT requirements commensurate with their risks. Moderate 4. Financial institutions and DNFBPs adequately apply AML/CFT preventive measures commensurate with their risks, and report suspicious transactions. Low
  3. 3. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 3 Immediate outcome of an effective system to combat money laundering (ML) and terrorist financing (TF) Extent to which Bangladesh has achieved this objective 5. Legal persons and arrangements are prevented from misuse for money laundering or terrorist financing, and information on their beneficial ownership is available to competent authorities without impediments Low 6. Financial intelligence and all other relevant information are appropriately used by competent authorities for money laundering and terrorist financing investigations. Moderate 7. Money laundering offences and activities are investigated and offenders are prosecuted and subject to effective, proportionate and dissuasive sanctions Low 8. Proceeds and instrumentalities of crime are confiscated. Low Ratings – Effectiveness (2/3)
  4. 4. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 4 Immediate outcome of an effective system to combat money laundering (ML) and terrorist financing (TF) Extent to which Bangladesh has achieved this objective 9. Terrorist financing offences and activities are investigated and persons who finance terrorism are prosecuted and subject to effective, proportionate and dissuasive sanctions. Substantial 10. Terrorists, terrorist organisations and terrorist financiers are prevented from raising, moving and using funds, and from abusing the non-profit sector. Moderate 11. Persons and entities involved in the proliferation of weapons of mass destruction are prevented from raising, moving and using funds, consistent with the relevant United Nations Security Council Resolutions. Substantial Ratings – Effectiveness (3/3)
  5. 5. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 5 Ratings – Effectiveness December 16 0 3 4 4 High Substantial Moderate Low
  6. 6. 13-Dec-16 6 Ratings – technical compliance (1/5) AML/CFT POLICIES AND COORDINATION 1. Assessing risks & applying a risk-based approach ParPa Pa Pa Partially compliant 2. National cooperation and coordination LarLarLarLar Largely compliant MONEY LAUNDERING AND CONFISCATION 3. Money laundering offence LarLarLarLar Largely compliant 4. Confiscation and provisional measures LarLarLarLar Largely compliant TERRORIST FINANCING AND FINANCING OF PROLIFERATION 5. Terrorist financing offence LarLarLarLar Largely compliant 6. Targeted financial sanctions related to terrorism & terrorist financing ComCo Co Co Compliant 7. Targeted financial sanctions related to proliferation LarLarLarLar Largely compliant 8. Non-profit organisations LarLarLarLar Largely compliant
  7. 7. 13-Dec-16 7 Ratings – technical compliance (2/5) PREVENTIVE MEASURES 9. Financial institution secrecy laws Pa ParParPa Partially compliant Customer due diligence and record keeping 10. Customer due diligence LarLarLarLar Largely compliant 11. Record keeping Co ComComCo Compliant Additional measures for specific customers and activities 12. Politically exposed persons LarLarLarLar Largely compliant 13. Correspondent banking LarLarLarLar Largely compliant 14. Money or value transfer services LarLarLarLar Largely compliant 15. New technologies Co ComComCo Compliant 16. Wire transfers Pa ParParPa Partially compliant
  8. 8. 13-Dec-16 8 Ratings – technical compliance (3/5) PREVENTIVE MEASURES (continued) Reliance, Controls and Financial Groups 17. Reliance on third parties LarLarLarLar Largely compliant 18. Internal controls and foreign branches and subsidiaries Pa Pa Pa Pa Partially compliant 19. Higher-risk countries Pa Pa Pa Pa Partially compliant Reporting of suspicious transactions 20. Reporting of suspicious transactions Co Co Co Co Compliant 21. Tipping-off and confidentiality Co Co Co Co Compliant Designated non-financial Businesses and Professions (DNFBPs) 22. DNFBPs: Customer due diligence LarLarLarLar Largely compliant 23. DNFBPs: Other measures LarLarLarLar Largely compliant TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL PERSONS AND ARRANGEMENTS 24. Transparency and beneficial ownership of legal persons Pa Pa Pa Pa Partially compliant 25. Transparency and beneficial ownership of legal arrangements Pa Pa Pa Pa Partially compliant
  9. 9. 13-Dec-16 9 Ratings – technical compliance (4/5) POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES AND OTHER INSTITUTIONAL MEASURES Regulation and Supervision 26. Regulation and supervision of financial institutions Pa ParParPa Partially compliant 27. Powers of supervisors LarLarLarLar Largely compliant 28. Regulation and supervision of DNFBPs Pa ParParPar Partially compliant Operational and Law Enforcement 29. Financial intelligence units LarLarLarLar Largely compliant 30. Responsibilities of law enforcement and investigative authorities Co ComComCo Compliant 31. Powers of law enforcement and investigative authorities LarLarLarLar Largely compliant 32. Cash couriers LarLarLarLar Largely compliant
  10. 10. 13-Dec-16 10 Ratings – technical compliance (5/5) POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES AND OTHER INSTITUTIONAL MEASURES (continued) General Requirements 33. Statistics ParPa ParPa Partially compliant 34. Guidance and feedback ParPa ParPa Partially compliant Sanctions 35. Sanctions ParPa ParPa Partially compliant INTERNATIONAL COOPERATION 36. International instruments LarLarLarLar Largely compliant 37. Mutual legal assistance LarLarLarLar Largely compliant 38. Mutual legal assistance: freezing and confiscation LarLarLarLar Largely compliant 39. Extradition LarLarLarLar Largely compliant 40. Other forms of international cooperation LarLarLarLar Largely compliant
  11. 11. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 11 Ratings – technical compliance 6 22 12 0 Compliant Largely compliant Partially compliant Non compliant
  12. 12. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 Key findings  Bangladesh has made significant progress since the last Mutual Evaluation Report (MER) in 2009, reflecting political commitment and leadership on AML/CFT.  Bangladesh faces significant money laundering (ML) and terrorism financing (TF) risks and competent authorities have a reasonable understanding of those risks. The National Risk Assessments (NRA) and sectoral risk assessments add to effectiveness and guide national strategies, however they do not comprehensively cover threats and TF. Inter-agency work to assess TF risks shows strengths, but more work is needed to assess foreign TF threats, to further assess ML threats and to share information on TF risks with the private sector. 12
  13. 13. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 Key findings 13  Bangladesh has a range of high-level coordination committees to set policy and coordinate AML/CFT priorities. The high-level National Coordination Committee (NCC) is well structured and draws on technical expertise from relevant agencies and has been instrument in driving key AML/CFT reforms. There were well functioning policy coordination structures for countering the financing of terrorism (CFT) and for implementing United Nations Security Council Resolutions (UNSCRs) against terrorism and proliferation of weapons of mass destructions (WMD). At operational levels, coordination and cooperation occur to a varying degree although recent reforms have sought to address identified issues particularly between law enforcement agencies (LEAs).  The 2015-17 National AML/CFT Strategy and CT strategies are, in part, driven by findings of risk assessments. AML/CFT strategies complement other strategies including CT priorities, but corruption-related ML remains the biggest unmitigated risk area.
  14. 14. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 Key findings  Bangladesh Financial Intelligence Unit (BFIU) demonstrated strengths in capacity and outputs. The quality of BFIU disseminations was generally good; however improvement is needed with the quality and quantity of reporting to the BFIU and LEAs’ systematic use of financial intelligence for predicate offences and ML beyond corruption cases.  The ACC had done a significant number of ML investigations related to corruption, but not other offences and until late 2015 Bangladesh had not sufficiently prioritised ML investigations and prosecutions consistent with the risk profile (ie predicates beyond corruption). At the time of the onsite visit only ML five trials had been completed and four convictions obtained, with 214 ML prosecutions pending due to lengthy delays with the courts. The October 2015 legislative amendments allow ML investigations by all relevant LEAs. 14December 16
  15. 15. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 Key findings 15  Provisional measures and confiscation outputs by LEA were low and most often related to instruments of crime. LEAs need to prioritise tracing, restraint and confiscation of proceeds. The BFIU’s powers to trace and freeze funds held on account adds to effectiveness. Seizures and confiscations by the Bangladesh National Board of Revenue (NBR - Customs and Tax) added effectiveness in some high risk areas.  Lengthy delays and capacity challenges in the justice system undermine effectiveness. The courts and the Attorney-General’s Office (AGO) are seriously under-resourced. ML and predicate trials are often delayed over many years and issues with judicial independence of the lower courts add to capacity challenges. Special Courts give the greatest priority to CT and terrorism trials and the TF trials have not been delayed.
  16. 16. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 Key findings  Bangladesh has conducted preliminary investigations (enquiries) into a large number of TF cases and a full investigation of 23 cases. A small number of TF prosecutions have been successful and a number are pending. Bangladesh’s focus on terrorism prevention and de-radicalisation adds to effectiveness. While Bangladesh has managed to combat TF threats related to ISIL, financing of foreign fighters is an emerging issue.  Bangladesh has a comprehensive regulatory framework for targeted financial sanctions (TFS) against terrorism. Bangladesh has designated six (6) domestic groups under UNSCR 1373. Outreach and implementation by reporting organisations (ROs) has not led to ROs spontaneously identifying matches with persons acting on behalf of designated entities to freeze assets. Freezing has predominantly occurred in cases where LEAs arrest members of a proscribed group and take TFS freezing actions pursuant to the designations. 16
  17. 17. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016  AML controls on the not-for profit (NPO) sector go significantly beyond the obligations in the FATF standards, but are not in keeping with TF risks. Stringent requirements on NPOs receiving foreign funding place onerous obligations on that part of the sector, but may not address domestic TF risks. Oversight and supervision does not adequately target TF risk. The recent NPO sector review considers some TF risk elements.  Bangladesh has a comprehensive legal and regulatory framework for TFS against WMD proliferation. Supervision of PF-related obligations by banks was undertaken, however this needs to be extended to other sectors. A number of case studies demonstrate levels of effectiveness of TFS systems and vigilance measures by authorities. 17 Key findings
  18. 18. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016  Bangladesh has made important progress with preventive measures for the financial sector and DNFBPs and has applied significant resources to raise ROs’ awareness of their AML/CFT obligations. ROs have made some progress in moving to a risk-based approach (RBA) implementation of preventive measures and rules-based implementation has deepened. Further implementation of key preventive measures is needed within and beyond the banking sector, in particular customer due diligence (CDD), domestic politically exposed persons (PEPs) and suspicious transaction reports (STR) reporting and wire transfers.  Bangladesh has controls in place to prevent criminals and their associates from entering the market, albeit with some gaps. Whilst improvements were being made, significant fit and proper risks with the board and management of state-owned commercial banks were not being sufficiently mitigated. 18 Key findings
  19. 19. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016  Bangladesh Bank (BB) needs to prioritise the RBA to supervision consistent with the risk profile. The frequency, scope and intensity of on-site inspections of commercial banks and non-bank financial institutions (NBFIs) were generally sufficient however there were inadequate resources available to undertake comprehensive supervision across all sectors, particularly DNFBPs. Available fines and sanctions were generally low and rarely applied.  Measures to ensure transparency and prevent misuse of legal persons and arrangements were not well established or implemented. Registration requirements for basic ownership were not well implemented. Beneficial ownership information was not required to be collected by legal persons or parties to legal arrangements. ROs’ obligations to understand the beneficial ownership of customers do not sufficiently mitigate risks of misuse of legal persons and arrangements. 19 Key findings
  20. 20. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016  Bangladesh demonstrated its strong commitment to international cooperation and its open and responsive approach to fulfil requests received from foreign partners. While the BFIU actively requests international cooperation and there have been some important successful mutual legal assistance (MLA) requests by Bangladesh, the overall level and focus of requests for international cooperation by LEAs, Customs and prosecutors (MLA) was not in keeping with the risk profile. 20 Key findings
  21. 21. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 Priority Actions for Bangladesh to strengthen its AML/CFT System 21  MHA, ACC, NBR should instruct all LEAs to prioritise parallel ML/TF enquiries with all predicate offences and terrorism cases and related asset tracing and freezing in keeping with the risk profile. Instructions should require LEAs to: – ensure the systematic use of financial intelligence and cooperation with BFIU. – prioritise formal and informal cooperation between domestic LEAs and international cooperation, in keeping with the risk profile, to target high risk areas – further target TF risks relating to trans-national terror groups – pursue MLA in keeping with the risk profile and improve processes / mechanisms for case management & coordination between the two central authorities. – build capacity of each LEA’s AML/CFT units
  22. 22. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 Priority Actions for Bangladesh to strengthen its AML/CFT System  Supplement National AML/CFT Strategies with detailed plans of operational priorities (investigations, prosecutions, proceeds of crime actions, supervision) including: – Address the regulation and supervision of state-owned commercial banks including improving: Finance Ministry implementation of the fit and proper checks; on and off-site AML/CFT supervision by BB; internal control and audit; sanctioning powers of BB. – Prioritise active use of TFS framework under S20A of the ATA to proactively freeze asset indirectly owned or controlled by proscribed persons / entities. – Conduct more in-depth risk assessments. This should include a corruption/ML risk assessment and an assessment of TF risks, including domestic and cross-border terror threats (Al Qaeda in the Indian Subcontinent (AQIS), ISIL, etc.). 22
  23. 23. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 Priority Actions for Bangladesh to strengthen its AML/CFT System  Increase the range, quality and timeliness of ML prosecutions & proceeds actions: – Address structural and resourcing issues of courts/prosecutors. – Provide AGO with more resources to support LEAs’ prosecutions and use of provisional measures at the enquiry stage of investigations – Develop and implement asset management procedures and capacity  Strengthen risk-based implementation of AML/CFT controls amongst ROs through increased outreach, guidance and supervision, with a focus on banking, securities and real estate. – Share available TF risk findings with the private sector. – Deepen the RBA across all sectors, with a focus on risks from domestic PEPs, verification of CDD, identification of beneficial ownership, ongoing CDD, better quality STRs and deeper implementation of TFS.
  24. 24. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 Priority Actions for Bangladesh to strengthen its AML/CFT System  Strengthen risk-based AML/CFT supervision by BFIU, BB and BSEC – Increase supervisory and regulatory resources in BFIU – BB and BSEC should prioritise their fit and proper checking, including of the beneficial owners of FIs, to address risks from domestic PEPs across key sectors and other supervisory interventions.  Amend the Companies Act 1994 and other statutes for transparency of beneficial ownership and control of legal persons and legal arrangements.  Refocus NPO sector AML/CFT controls in keeping with the FATF standards and the NGO review findings to avoid disrupting the legitimate activities of NPOs and better target TF risk mitigation.

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