Sarwar Chowdhury was invited to speak at the Fintelekt Annual AML Summit held in Dhaka on 6th feb 2017. He presented his views on ‘Challenges in AML Implementation’ to a distinguished set of MDs, DMDs, CAMLCOs, Senior Bankers and AML professionals. His thoughts, in summary, are that Bangladesh faces unique and immediate issues in AML compliance primarily because of: 1. Lack Senior Management Focus 2. Paucity of the right skill sets and manpower 3. Poor data quality 4. Limited cost effective or relevant solutions 5. De-risking is an immediate threat.

1. AML Implementation
Challenges faced by
banks in Bangladesh
Presented By
Sarwar Chowdhury
AML Annual
Summit, Dhaka
2017

2. Page |
Business
• More than 70% banks globally have reported being affected
by De-risking
Reputation
• Fines, Penalties & Sanctions affect the reputation of the Bank
more than any other Business related action
Growth
• Affected FIs have showcased stunted long-term growth
Governments & Agencies
• Maintain constant pressure & vigil on the Bank
Personal Liability
• Heads of Bank, Compliance etc. are now going to jail
What is at Stake
7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 2
Insights from AMLMaps.com

3. Page |
Scenario in Developing Countries
7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 3
This is NOT JUST happening in Bangladesh
• Fines show greatest increase
• AML/CFT has become the highest focus for
governments
• Public perception is increasingly critical
• Global de-risking is primarily in developing countries
• Information & Compliance reporting requirements
have increased in a major way
• Powerful regulators are indirectly penalizing banks of
other countries
Insights from AMLMaps.com

4. Page |
In the Media
7 February 2017 4
Global de-risking affecting
banks
Record fine highlights need for
continuous AML compliance by
firms of all sizes
$6.5M Fine for Persistent
BSA/AML Failures: Prelude to
OCC's Announcement of Tougher
Enforcement Environment
Fintelekt AML AML Annual Summit, Bangladesh

5. Page |
In the Media
7 February 2017 5
The IMF and the Fight Against
Money Laundering and the
Financing of Terrorism
Regulators Renew Their Focus on
Anti-Money Laundering
Compliance
Over 50 pc banks fail to assess
money laundering risks properly
Fintelekt AML AML Annual Summit, Bangladesh

6. Page |
In the Media
Western Union Settles with DOJ, FTC on Fraud and Money Laundering Violations
7 February 2017 6
Bangladesh to publish NY Fed
heist probe finds after retrieving
money from Philippines
Bangladesh's Sonali bank fined
£3.3m
Fintelekt AML AML Annual Summit, Bangladesh

7. Page |
Large dependency on correspondent banks
• Such entities have highest correspondent banking relationships in the world
• Global entities are fined as a result of their correspondent banking relationship
• Understandably, these banks are engaging themselves in large scale de – risking
Thriving curb market (Hundi) channels for money laundering
• This unofficial market runs absolutely parallel to formal channels in Bangladesh
• Money transfers via hundi leads to siphoning off funds from Bangladesh
• The risk of Hundi market was highlighted during Demonetization in India - Remittances reduced for first time in 4 years
Bank profits critically dependent on foreign remittances ($15 Billion)
• Banks earn risk free commissions by routing remittances
• It is estimated around 20% of the operating profits by the banks in Bangladesh are derived from forex business
• Over 15 Billion Dollars remitted in 2015
7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 7
Why Banking Institutions are threatened

8. Page |
Top 5 AML Challenges In Bangladesh
7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 8
1
2
3
4
5
Senior Management & Board exposure to AML requirements or Criticality
Availability of the right skills & manpower
Poor base level customer & transaction data
Limited cost effective & Bangladesh specific solutions
Need is immediate as the danger of De-risking is immediate

9. The Solution…
A Successful AML Program

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Most Critical Requirement: Tone at the Top
• Seriousness and Focus shown by
the Board & Senior Management
• Critical for success of AML Programs
• Globally relevant for
• Regulators & Agencies
• Correspondent Relationships
• Increasing personal liabilities & fines
on banking professionals for AML
Gaps
7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 10
Chairman of Board
Chief
Compliance
Officer
Founder
Chief
Operating
Officer
Owner
Former
President
Former
Prime
Minister
Former
Chief
Executive
Officer
President
Chief
Executive
Officer
Global AML Actions & Designations
Chairman of Board along with Founders have been one of
the most convicted professionals amongst individuals. This
trend is expected to continue & grow.
Insights from AMLMaps.com

11. Page |
Successful AML
Implementation
Resources for a Successful AML Program
7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 11
People
TechnologyProcess
 Screening Mechanism (PEP, third
parties etc.)
 KYC diligence
 Transaction Monitoring
 Risk prioritization
 Independence of Function
 Independent testing procedures
 Manual processes
 De-centralized systems impacting
monitoring & documentation
 Coverage & Reporting
 AML expertise
 Visibility of AML issues
 Management Oversight
 Inadequate training mechanism

12. Page |
AML Implementation
7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 12
• Lots of working parts
• Combines People,
Process & Technology
• Based on a defined
road-map
• Consists of 3 phases
1. AML Diagnostic
2. Risk Map
3. Implementation Plan

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Building the AML Action Plan
7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 13
Developing a Risk Heat Map of all the issues
and concerns to prioritize an action plan. This
will help in:
 Managing Resources
 Building Competency
 Technology Integration
 Risk Based Approach

14. Page |
What do Parts of the AML Program look like?
7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 14
Risk Organization
Risk Based Approach
Client On-Boarding Transaction Monitoring On Going Management
Governance Ownership Responsibility Communication
Client risk Profiling
Client Screening
Client Due Diligence
Client Acceptance
Identify & Track Suspicious
Transaction
Monitoring versus Expected
Activity
Investigation of Alerts
Payment Filtering
Ongoing Client Due Diligence
Ongoing Screening
Enhanced Due Diligence
Product Due Diligence
Behavior Profiling
Skills &
Knowledge
Training Information Resource Succession Planning
Management
Information
CAMLCO
Report
Compliance Reporting
Suspicious Activity & Alert
Management
Case Management
AML Program Framework BMR-Kroll
Continuous
Innovation
Client Profiling Methods
Monitoring & Detection
methods
Operational Risk review
Methods
Best Practice Methods
Life Cycle Client Experience
Analytics Method

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Risk Based Framework
• Forms the base of the AML Program
• Requires significant Analytics, Subject
Matter and On-Ground Assessment
Support
• Needs to be incorporated in the AML
Systems
• Requires continuous assessment &
evolution
• Success of RBF means success of the
AML Program
KYC & Due Diligence
• Incorporates equal parts of People,
Process & Technology
• Changes from Branch to HQ
• Standardization & Integrity of KYC
information is critical
• Technology systems for Screening, Record
Management & Centralization
• Data Inputs for Negative Media, Sanctions
& PEP Screenings
7 February 2017 15Fintelekt AML AML Annual Summit, Bangladesh
4 Important Parts | AML Program & Challenges
A B

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Transaction Monitoring
• Critical & Essential component to
determine ML Gaps
• Integration required with CMS and other
systems
• Training & team to be setup with required
skills
• Testing, Integration & Data reforms pre-
requisite
• Selection of the right tool – cost, scalability,
usability & flexibility
Training & Resources
• Staffing the AML Department with the right
people
• Training Subject Matter Experts & Trainers
• Using records & technology for training
• Aligning the HR & Training departments to
the requirements
• Finding the right internal & external talent
in Bangladesh
• Continuous training & evaluation
7 February 2017 16Fintelekt AML AML Annual Summit, Bangladesh
4 Important Parts | AML Program & Challenges
C D

17. AML Program
Implementation in
Bangladesh

18. Page |
• A leading & trusted bank in Bangladesh, with extensive
domestic, trade and remittance business
• Faced extensive scrutiny by
• Local Regulators
• Global Agencies
• Critical Correspondent Banking relationships
• Required by stakeholders & relationships to establish
Adequacy & Intent of AML/CFT program in the bank
• At a critical juncture where there was possibility of
• Extensive impact to business
• Loss of reputation
• Possible AML fines & fallout
Introduction
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What did the
Bank Do?

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What did it do?
7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 19
1
• Senior Management discussions &
workshop
• Steering committee for setting up
strong AML program endowed with
top resources
• Setup of an independent AML
function
2
• Kroll-BMR conducted AML
Diagnostic to assess the AML
standing of the bank
• Risk Map of Med to High risk
areas determined
• Listed AML/CFT gaps for the
banks with follow-up plan
3
• Kroll-BMR created a
comprehensive AML roll-out plan
• All aspects & departments covered
• Technology & training support
brought into the bank
• Monthly tracking of milestones to
ensure completion
• Senior banking officials made
project owners to ensure
implementation
AML Diagnostic
Commitment by
top management
AML Program
Enhancement

20. Page |
Step 1 | Commitment by top management
7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 20
1Commitment by
top management
 The Board and Senior Management quickly swung into action to determine
requirements of various external stakeholders
 Constituted a high level steering committee to determine next steps
 Started engaging with regulators, agencies & relationships to communicate plans
 Engaged with a leading global AML advisory team of Kroll-BMR
 Setup an independent AML function headed by a senior experienced banking
professional to ensure focus
 Setup a focused & high energy AML Project Management team

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Step 2 | AML DiagnosticTM
Extensive High Level Review of the Bank’s AML Program
A. KYC & Due Diligence
B. Transaction Monitoring
C. Screening
D. STR/ SAR filing
E. Risk Based Framework
F. Management Oversight
G. Training and Resources
H. Independent Testing
I. Global Relationships
J. Record Keeping
K. Branch Monitoring
L. Reputation Management
 Screening Mechanism
 KYC diligence
 Transaction Monitoring
 Risk prioritization
 Independence of Function
 Independent testing procedures
 Manual processes
 De-centralized systems
impacting monitoring &
documentation
 Coverage & Reporting
 AML expertise
 Visibility of AML issues
 Management Oversight
 Training mechanism
People
Process
Technology
7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 21
2AML Diagnostic

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Step 3 | AML Program Enhancement
Post Assessment, a year long exercise was carried out to
enhance the following major areas of concern
A. Risk Based Framework
B. KYC & Due Diligence
C. Screening
D. Transaction Monitoring
E. Analytics
G. Compliance Organization
H. Training
I. Record Keeping Procedures
J. Independent Testing
K. KYC Remediation
Roll-Out
Technology &
Process
Incorporate
Handholding End State
Testing &
Execution
7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 22
3AML Program
Enhancement

23. Page |
Creation of a future-ready AML Program, based on the business realities & global best
practices
Development,
Testing,
Implementation and
Handholding
through the AML
Program creation
process
4
On ground
implementation of
various process,
documentation,
policy, analytics and
procedures for the
AML Program
Linkage of varied
parts of the AML
Program, for
seamless
integration with the
Risk Based
Framework
Quality assessment
and testing of the
outcomes, process
and program under
development
1 2 3
7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 23
Key Results

24. In Summary…

25. Page |
5 Things to do NOW!
7 February 2017Fintelekt AML AML Annual Summit, Bangladesh 25
Step1
Workshop
for Board
Step2
Empowered
Senior
Management
Committee
Step3AML
Diagnostic
Step4
Bring in the
Technology
Step5
Create the
AML
roadmap

26. Thank You!
Happy to take your Questions
AML Annual
Summit, Dhaka
2017