Anti Money Laundering Activities and Prevention

Anti Money Laundering Activities and Prevention
A Study on BRAC Bank Limited

This report aims at providing an overall analysis of the Anti Money Laundering Activities and its prevention in BRAC Bank. As the bank deals with money, people sometimes tend to utilize the advantage of banks to conduct different types of illegal chores to reap benefit out of it, so banks have to make sure that these types of illegal activities do not take place. To prevent these activities they take necessary steps and follow some structured guidelines.

The purpose of this study is to present the scenario and prevention of money laundering in Bangladesh in terms of banking sector at the perspective of BRAC Bank Ltd. Bangladesh faces significant risks of money laundering (ML) and some risks of terrorism financing (TF).

The authorities readily acknowledge the prevalence of corruption, narcotics trafficking and human trafficking. Bangladesh has required its banking sector to adopt anti-money laundering/combating the financing of terrorism (AML/CFT) preventive measures for several years, however there are significant gaps in coverage with securities and remittance sectors not yet included in the regime. While progress has been made, the scope and depth of preventive measures needs to be expanded in scope (activities and obligations). AML preventative measures were initially set out in the MLPA 2002, which was replaced by the MLPO 2008, and various Bangladesh Bank AML Circulars, and in enforceable AML Guidance Notes. Bangladesh Bank has issued a number of Anti Money Laundering Circulars to instruct banks and financial institutions on detailed AML/CFT preventative measures.

Objectives of the Report:

The main objective of the study is to present the scenario and prevention of money laundering in Bangladesh in terms of banking sector at the perspective of Brac Bank Ltd. In a broader sense, the specific objectives to be analyzed would include the followings:

Broad Objective:

• To analyze the Anti Money Laundering (AML) Activities of BRAC Bank Ltd.

Specific Objectives:

• To analyze the AML activities which are conducted in the bank.
• To analyze why AML activities are conducted.
• How these are done in this bank.
• What measures are taken to prevent money laundering
• To make Recommendation to the AML Department.

Methodology:

From selection of the topic to final report preparation the study requires an orderly procedure. Data sources are to be identified and collected, to perform the study. They are to be categorized, analyzed, interpreted and presented in an organized manner and key points are to be found out.

So, all the information is collected from primary and secondary sources. Most of the relevant information has been collected by practically working in the department and discussing with the department employees and supervisor and also collected few data from the banks e-learning.

Primary Data:

• Primary data was gathered by discussing with the employees of the department.
• To support myself in learning more about the topic, direct observations played a very important role.

Secondary Data:

 Various internal and external sources for secondary data helped me and those are:

• Annual report of BRAC Bank Ltd
• Relevant file study as provided by the concerned officer
• Some brochures and related articles of BBL and
• Some other papers given by my supervisor in BBL.
• Publications obtained from the Internet and from the website of BBL.

Overview

In 1972 BRAC started as a development organization dedicated to alleviate poverty by empowering the poor to bring about change in their own lives. BRAC BANK is one of the largest operational commercial venture with a

Vision

“Building a profitable and socially responsible financial institution focused on Markets and Business with growth potential, thereby assisting BRAC and stakeholders build a “just, enlightened, healthy, democratic and poverty free Bangladesh”.

BRAC Bank Limited is a full service scheduled commercial bank. It has both local and International Institutional shareholder. The bank is primarily driven with a view of creating opportunities and pursuing market niches not traditionally meet by conventional banks.

BRAC Bank has been motivated to provide “best-in-the-class” services to its diverse assortment of customers spread across the country under an on-line banking dais.

Today, BRAC Bank is one of the fastest growing banks in the country. In order to support the planned growth of its distribution, network and its various business segments, BRAC Bank is currently looking for impressive goal oriented, enthusiastic, individuals for various business operations.

The bank wants to build a profitable and socially responsible financial institution. It carefully listen to the market and business potentials, It is also assisting BRAC and stakeholders to build a progressive, healthy, democratic and poverty free Bangladesh. It helps make communities and economy of the country stronger and to help people achieve their financial goals. The bank maintains a high level of standards in everything for our customers, our shareholders, our acquaintances and our communities upon, which the future affluence of our company rests.

With 155 Branches, SME Service Centers & SME/Krishi Branches, 322 ATM Booths, 31CDMs, 398 SME Unit Offices and more than 7,695 (as on May 2013) BRAC Bank is one of country’s fastest growing banks. The bank has already proved to be the largest SME financier in just 12 years operation in Bangladesh and it is continuing to broaden its horizon into Retail, Corporate, Foreign Remittance and other areas of banking with more than 1.3 Million Customers. In the year: 2010, BRAC Bank has been recognized as Asia’s most Sustainable Bank in Emerging Markets by the Financial Times and IFC.

Divisions of BRAC Bank Limited

• SME Banking
• Retail Banking
• Corporate Banking Division
• Cash Management & Custodial Services
• Treasury & Financial Institutions
• Human Resources Division
• Finance Division
• Credit Risk Management
• Operations
• Technology
• Company Secretariat, L & RA
• Risk Management
• Special Asset Management
• Research & Development
• Service Quality

Products and Services of BRAC Bank Ltd.

BRAC Bank Limited is offering different types of service Products and services to their retail customers. The services of PFS and Credit Card Services are known as Retail banking or Consumer Banking. Retail banking deals with providing the bank services to individuals on a one-to-one basis.

SME banking:

Initially, BRAC bank started their journey to cater SME business. BRAC bank believes in empowering huge human resource in the country. After liberation war, most of the commercial banks were providing large amount of loan to large industries and big corporations. No was doing anything for small and medium entrepreneurs, no one was thinking their potentiality. This group was defined as “Missing middle”. This missing middle had the potentiality but due to shortage of fund, they could not contribute to the national economy. With a view to providing them, a firm ground under their feet BRAC bank is providing SME loan service to this missing middle.

Retail Banking Division

Retail Division offers a wide array of lucrative and competitive banking products to the individual customers of the bank. Recently a new retail banking model has been develop. In this model BRAC Bank design their products based on customer standing. Easy, Excel, Supreme and Premium banking has been developed to serve the customer. It also offers different types of term deposit scheme and attractive STD & Savings deposit schemes giving interest on daily balance.

SWOT Analysis –

The comparison of Strengths, Weaknesses, Opportunities and Threats is normally referred to as a SWOT analysis. Its central purpose is to identify the strategies that will create a firm-specific business model that will best align, fit, or match a company’s resources and capabilities to then demands of the environment in which it operates.

Strengths

• Well Capitalized
• Brand Name
• Faster Processing
• Young Energetic Employees
• Superior Customer Services
• Excellent Networking System

Opportunities

• Acquire Asset
• Expansion
• Launching New Services
• Foreign Outlets
• Better Deal In B2B Sector
• Applied Research Centers

Weaknesses

• Limited Banking Service
• Lack of entry-level experience
• Lack of Research
• Migration tendencies of employees

Threats

• Increasing Competition
• Difficulties to Expand Market in
• Rural Areas
• New Legal System

Anti Money Laundering

To prevent use of products and services for money laundering purposes, BRAC Bank is committed to the highest principles of anti money laundering (AML) compliance and requires management and employees to adhere to these standards. Usually financial institutions are vulnerable to being used by money launderer; BRAC Bank Ltd has always taken its measure to prevent money laundering. The Board of Directors of the Bank view Money Laundering Prevention as a part of Risk Management strategy and essential part of the Bank’s business systems and needs.

Based on the experience gained and the opinion expressed by national and international experts, the Money Laundering Prevention Act, 2009 was rescinded and a new law named Money Laundering Prevention Act, 2012 was promulgated with effect from January 16, 2012.

What Money Laundering is

As per Money Laundering Prevention Act (MLPA) 2012, Money Laundering means –

Conscious transfer, transform or relinquish of asset relating to crime with following intention:

• Conceal or disguise the illegal nature, source, position, ownership and control of illegitimate income. Or
• Provide assistance to a person involved in committing the predicate offence, with intent to evade the legal consequences of his action

Smuggle fund or property, earned through legal or illegal means, to foreign countries through illegitimate norm.

Conscious transfer, transmit to foreign countries or receipt in Bangladesh with a purpose of concealing or disguising the illicit origin of income derived from criminal activity.

To conduct, or attempt to conduct a financial transaction with intent to avoid a reporting requirement under this Act. (Structuring)

Convert or transfer or transform any legal or illegal property with the intention to influence or facilitate performing relevant offence.

Receiving property, acquiring position or making use of the same instead of being aware of the illicit origin of fund

Being involved in an act that facilitates to conceal or disguise the source of illegally obtained proceeds.

Participate, be the part, conspiracy in committing, try to commit or facilitate to commit, influence or guide any offence stated above.

Predicate Offence means such a following offence by which the earned money is laundered or attempt to launder. The lists of twenty seven predicate offence:

1. Bribe & Corruption
2. Counterfeiting of Currency.
3. Counterfeiting documents
4. Extortion
5. Fraud
6. Forgery
7. Illicit Arms trafficking
8. Illicit Traffic in Narcotic Drug and psychotropic substances
9. illicit dealing in stolen and other goods
10. Kidnapping, illegal restraint, hostage-taking
11. Murder, grievous bodily injury
12. Child & Woman Trafficking
13. Smuggling
14. Unauthorized cross-border transfer of domestic and foreign currency
15. Robbery, Theft or dacoity or Water/Air Piracy.
16. Human Trafficking
17. Dowry
18. Smuggling and offence related to duty evasion
19. Offence related to Tax

20. Violation of intellectual patent right
21. Terrorism or Terrorist Financing
22. Counterfeiting and piracy of product
23. Environmental crime
24. Sexual Exploitation
25. Insider trading and Market manipulation
26. Organized Crime
27. Fund collection through unfair threatening.
28. Any other related offence as decided by Bangladesh Bank with approval of government serving the purpose of MLP Act 2012

In short, money laundering is the way in which criminals turn their illegal proceeds or “dirty” money, which can be traced back to them, into “clean” money, which cannot be linked to any crime.

Definition of Money Laundering as per section 2(L) of Money Laundering Prevention Act, 2002 in the earlier Act on anti-money laundering, two categories of activities were defined as money laundering, namely:

Earned or acquired assets directly or indirectly through illegal means.

Transfer, conversion, concealment of whereabouts of earned/acquired assets, which was earned directly or indirectly through illegal means, or assisting such activities.

Definition of Money Laundering as per section 2(k) of Money Laundering Prevention Act, 2009 Four categories of activities have been defined as money laundering in the present Act, namely:

Transfer, conversion, remitting abroad or bring from abroad to Bangladesh the proceeds or properties acquired through commission of a predicate offence, for the purpose of concealing or disguising the illicit origin of the money or property;

Illegal remitting abroad of money or properties acquired/earned through legal or illegal means.

To conduct, or attempt to conduct a financial transaction with an intent to avoid reporting requirements.

To do or attempt to do such activities so that the illegitimate source of the fund or property can be concealed or disguised or knowingly assist to perform or conspire to perform such activities.

In brief, four categories of activities that are defined as money laundering in the new Act are:

Transfer, conversion, remitting to and from Bangladesh involving proceeds of a predicate offence.

Illegal remitting abroad of legally/illegally earned money/property.

Transaction to avoid reporting requirements.

To assist such activities.

What is Money Laundering: Classic View

The process by which one conceals the existence, illegal source or illegal application of income, and then disguises that income to make it appear legitimate. That is, the money-launderer is converting his dirty money to clean money.

Reverse Money Laundering

The act of transferring/placing legitimate money and assets into an underground criminal network to support criminal activity. That is, one who is investing his clean money to dirty activities, he is laundering money.

Motivations for Laundering Money

There are numerous motivations for laundering money. Some notables are:

• Avoid revealing involvement in the underlying crime;
• Hide it so that the Government can’t take it away;
• Criminal needs it for future illegal activity;
• Be able to spend it!

Kinds of Criminals Launder money

Situations depend on country to country. In Bangladesh, mainly the following categories of persons are associated with money laundering –

• Public officials who receive bribes;
• Businessmen to finance smuggling, under-invoicing, over-invoicing;
• Human traffickers;
• Migrants to transfer assets;
• Drug dealers and terrorist financers.

As we have seen that transaction to avoid reporting requirements has been defined as money laundering. Let us now see who are to reports, that is, which are reporting agencies:

• Bank/Financial Institutions;
• Insurance Companies;
• Money changers;
• Companies remitting money;
• Any such organization declared by Bangladesh Bank.

Why we must prevent Money Laundering

Money laundering helps to commit crime. It has a very shocking consequence over our economy, security and social life. It intrigues the drug dealers, smugglers, terrorists, illegal arms dealers, corrupt public officials, and others to conduct and stimulate their criminal activities. To combat these activities the cost of the government increases for expanding the law enforcement and health care expenditures (for example, for treatment of drug addicts).

Government tax revenue is lessened because of Money laundering and therefore ultimately harms honest taxpayers. It also makes government tax collection more complex. Besides it transmits economic power from the market, government, and citizens to criminals.

Purpose of Money Laundering

Generally money laundering helps to hide the illegal origin of the money which is generated by criminal activities. The purpose of money laundering is to split the link between the money and the crime that generated the money.

Criminals conduct money laundering for three main reasons:

• Money is needed to manage and precede criminal action for financial gain.
• Avoid audit trace to conceal the source of their wealth to make them look legal to escape trial.
• To cover ill-gotten gains from suspicion and protect them from seizure.

Process of Money Laundering

Money laundering is not a single action rather it is done step by step. Money laundering process begins after the offences are committed and funds have been generated. These stages are:

• Placement At this stage, illegal funds or assets are first placed into the financial system. This ‘placement’ makes the funds more liquid. For example, for manipulation and easy transfer cash is converted into a bank deposit. There are other varieties of techniques used by Money launderers to place illegal funds, which may include depositing cash into bank accounts and using cash to purchase assets.

• Layering The process of moving the placed funds from their illegal origins is known as ‘layering’. The illegal origin is hidden and the funds are kept on the run, disguised. To layer the funds money launderers use multiple banks and accounts, and make transactions corporations and trusts. Funds may also be transferred through many accounts, companies and countries to hide their origins.

• Integration Once the funds are layered, they are made available to criminals to use and control as evidently legal funds. This final stage in the money laundering process is called ‘integration’. The laundered funds are made available for activities such as investment in legal or illegal businesses, or spent to promote the criminal’s lifestyle. At this stage, the illegal money has earned the look of authenticity.

Penalties for Money Laundering and Fine Imposed by Bangladesh Bank

• 4- for involvement by any means with Money Laundering- 4 years to 12 yrs imprisonment with fine of the money minimum 10 lac or double the amount involved with the crime whichever is higher will be confiscated.
• 5- for violating attachment order or Freezing order’- – either max. 3 yrs. imprisonment or to fine the frozen amount advised or asset involved with the instruction or with both
• 6- for divulging info. for impeding the investigation either max. 2 yrs. Imprisonment or to fine which may extend to 50(fifty) thousand taka, or with both.
• Sec 7- for refusing to assist or co-operate with authorized investigating officer, without any reasonable ground: either max. 1yr imprisonment or to fine which may extend to 25 (Twenty Five) thousand taka, or with both.
• 8- for providing false information on source & identity of the client or nominee knowingly: either max. 3yrs imprisonment or a fine of max. Tk 50K or both.
• 25- failure by Banks/ Fin. institutions to preserve and supply the required data information and non reporting of a suspicious transaction knowingly– Central Bank can impose a fine which may extend to extend to 25(twenty five) lac taka but not less than 50 (fifty) thousand taka. Even cancellation of license
• Sec 23- Bangladesh bank can impose a fine up to 5 lac taka (per day 10K), if reporting institution/bank fails to provide information within stipulated time.
• The offence of money laundering is punishable by terms of a minimum imprisonment for six months and a maximum of up to seven years plus a fine amounting to double the money laundered (See Section 13 of the Act).
• The punishment for violation of Seizure Orders is a minimum imprisonment for one year or a fine of at least Taka ten thousand, or both. (Section 14 of the Act).
• The punishment for violation of Freezing Orders is a minimum imprisonment for one year or a fine of at least Taka five thousand, or both. ( Section 15 of the Act).
• The offence of divulging information by informing i.e. tipping off the person who is the subject of a suspicion, or any third party is punishable by a minimum imprisonment for one year or a fine of at least Taka ten thousand, or both. (Section 14 of the Act).
• The offence of obstructing investigations or failure to assist any enquiry officer in connection with an investigation into money laundering is punishable by a minimum imprisonment for one year or a fine of at least Taka ten thousand, or both. (Section 17 of the Act). If any bank, financial institution and other institutions engaged in financial activities fail to retain customer identification and transaction records or fail to furnish required information as per the Act, Bangladesh Bank will report such failure to the licensing authority of the defaulting institution so that the concerned authority can take proper action for such negligence and failure ( Section 19 (3) of the Act)
• Bangladesh Bank is empowered to impose fines of not less than Taka ten thousand and not more than Taka one lac on any bank, financial institution and other institutions engaged in financial activities for the failure or negligence to retain customer identification and transaction records or fail to furnish required information to Bangladesh Bank (Section 19 (4) of the Act). 8. If any Company, Partnership Firm, Society, or Association violates any provisions of the Act, it will be deemed that every owner, partner, directors, employees and officers have individually violated such provisions.
• Bangladesh Bank has the authority to instruct any banks or institutions to freeze or suspend the transaction for 30 days. However, if needed this order can be extended up to six times.

Responsibility of BRAC Bank for Prevention of Money Laundering under this Act:

• During the operation of the accounts, keep the correct and full information of identification of the client.
• Keep previous transaction profile or tp of any closed accounts of customer for at least 5 years from the date of closure.
• Provide the records kept under clause (a) and (b) to Bangladesh Bank on demand time to time.
• Immediately inform BB, facts on suspicious transactions which might look like money laundering.

How to Prevent Money Laundering

All BRAC Bank branches and departments have to comply with the following basic principles:

Assurance of customer identity:

• Before entering into a long term relationship
• During any transaction or deal

Establishment of purpose of business relationship:

Before entering into long term business relationship, BBL must gather information of the business if it is not clear from the business relationship.

Identification of ultimate beneficial owner

When BBL is required to identify a customer, it has to verify the identity of the final beneficiary or who owns or controls the assets or who owns more than 20% share of the company or on whose behalf the transaction is carried out.

Client account monitoring

To discover any unusual or suspicious transaction a continuous monitoring of clients’ is necessary. It will be implemented with proper process and system.

Reporting of suspicious circumstances/transactions: Any suspicious transactions must be reported to the concerned authorities according to local law.

Staff reliability: BRAC Bank must not employ staffs who are not considered reliable.

Anti Money Laundering controls: The in charge AML officer must ensure that the customer and business related security measures are properly working.

Anti Money Laundering Training: AML training is a requirement for the employees for conducting the transactions or establishing any business transactions. BBL provides the training on prevention of money laundering to every employee according to the Central Bank guidelines.

Customer Due Diligence: If the employees have a sound knowledge about the customers, their business and outline of financial transactions money laundering can be prevented. The procedure is known as know your customer or KYC. It not only helps to stop money laundering but also is good practice.

Politically Exposed Persons (PEPs)/Public Figure and Associates (PFAs)

People who are entitled to public actions in a foreign country for instance Heads of State or governments, military officials, senior politicians, important political party officials are considered as PEPs or politically Exposed Persons and local PEPs as PFAs or Public Figure and Associates by BRAC Bank. Before entering into such kind of relationship, branch has to take approval from CAMLCO with recommendation from concerned business head.

Transaction Monitoring Process:

To monitor ongoing transaction activities BBL has enough systems and controls. Discrepancy is measured against the original purpose of the accounts i.r. declared Transaction profile (TP) of the customer. Probable areas to monitor are: –

• Transaction type
• Frequency
• Unusually large amounts
• Geographical origin/destination
• Changes in account signatories

Branches are supposed to make a huge value Cash Transaction Report (CTR) and review the transaction pattern on a daily basis.

An exception report of customers are also needed to be generate whose transaction amount crosses the limit mentioned in transaction profile on a monthly basis.

BAMLCO (Branch Anti Money Laundering Compliance Officer) will review the report and will prepare internal Suspicious Activity Reports (SAR) and send to CAMLCO. A copy of the transaction identified should be attached to the SAR. CAMLCO will review the SAR along with comments from the BAMLCO.

A status report will be sent to Bangladesh Bank which is investigated by CAMLCO. Until Bangladesh Bank notifies what to do, no further encounter will be made. If after the confirmation with the client transaction is to continue, the account officer will be responsible for documenting the causes why the TP has changed and alter the KYC where needed.

Recognition and Reporting Suspicious Transaction (STR):

It is the duty of the branch to ensure that the employees are reporting any doubtful activities to BAMLCO, so that the BAMLCO is aware of the information in the report and there are some criteria against which STR can be raised. They are

• If a customer fails to supply suitable answer for the excess transaction over TP limits.
• Inadequate, fake or doubtful information provided by the customer.
• Any reason to believe or if it seems that the money came from illegal activities.
• A transaction which has reason to believe is odd for the type of business the customer is in.
• Characteristics or activities that are strange in the circumstance of the customer business

CAMLCO must be aware of all the suspicious activities and only he can decide whether any exposé would be appropriate in accordance with the guideline or not. Until Bangladesh Bank informs the bank they have to preserve the suspicious reports.

The reporting channel is:

• Notices suspicious transactions –reports directly to the BAMLCO/BM/LM
• Line Manager conducts necessary investigation or instruct responsible person to do the same
• Line Manager reports the case to CAMLCO
• CAMLCO reports the case to Bangladesh bank

CTR (Cash Transaction Reporting)

If the cash transaction (deposit/withdrawal) is ten lakh or above, it is alarming. These types of transactions have to be submitted to the Central Bank in softcopy. If the transactions of cash deposit are in Govt. or Govt. owned accounts, the CTR is not necessary. However in case of cash withdrawal, that CTR must be reported.

Anti-Money Laundering Legislation in Bangladesh

First anti-money laundering legislation of the country is Money Laundering Prevention Act, 2002, which was effective from 7th April,2002 to 14th April,2008. It was replaced by the Money Laundering Prevention Ordinance on 15th April,2008; subsequently, the ordinance was passed by the national parliament and Money Laundering Prevention Act,2009 was enacted giving effectiveness from 15th April, 2009 (Gazette Notification:24th Feb,2009).

Responsibilities of Reporting Agency

Let us now see what are to be reported by the reporting agency:

• Keeping full information of it’s’ clients (KYC);
• Inform Bangladesh Bank proactively and immediately on suspicious transactions likely to be related to money laundering.

Suspicious Transaction as per section 2

Reporting agencies are to report suspicious transaction. Section 2 defines suspicious transaction as:

• Transaction that substantially deviates from usual transaction;
• Reasonable cause to believe that the transaction is related to any proceeds of crime.

Investigation and Trial under Money Laundering Prevention Act, 2002

As per section 5 of the Money Laundering Prevention Act, 2002, investigation was to be done by the Bangladesh Bank or any person authorized by Bangladesh Bank. And as per section 6 of the Money Laundering Prevention Act, 2002, all Session Judges were empowered for trial of money laundering cases.

Investigation and Trial under Money Laundering Prevention Act, 2009

Followings are the notable features of investigation and trial process under the Money Laundering Prevention Act, 2009:

• As per section 11, offences under the Act shall be cognizable, non-compoundable, nonbailable.
• Any individual may provide information to file First Information Report about the commission of a money laundering occurrence to the police station as per section 154 of CrPC.
• Offences under the Act considered as scheduled offences of the Anti-Corruption Commission Act, 2004; therefore, such offences can be investigated only by ACC (Section 9(1).
• To be tried by the Special Judge (Section 10).

Bank Account Freeze by Bangladesh Bank

Bangladesh Bank can issue order to any Bank/Financial Institutions to freeze an account for 30 days (can be extended further 30 days) where there are grounds to suspect that the transaction involves proceeds of crime (Section 23©). Special Judge can order continuation of such freezing (Section 10).

Freezing and Attachment of Property (Section 10)

Upon application of the investigating organization, the Court may give order of attachment of property, wherever situated, within or outside Bangladesh. Mutual Legal Assistance Request (MLAR) through the Attorney General Office is needed if the property is in outside of Bangladesh.

Enforcing Organizations

Bangladesh Bank: Keeping database and analyze facts provided by the reporting organizations. Giving direction to the reporting organization and monitoring their activities. Usually these are done by the Money Laundering Prevention Unit of Bangladesh Bank.

Financial Intelligence Unit (FIU) of BB: Exchanging information about suspicious transaction with FIU of other countries on the basis of signed contract.

Ministry of Home Affairs and Attorney-General Office: Central authority for MLAR. Anti-Corruption Commission: Investigating Organization.

Burden of Proof/Evidence

There is no such provision in the Money Laundering Prevention Act that burden of proof lies with the accused. Collecting evidence of corroborative elements with predicate offences is important to prosecute. However, as per section 7 of the Criminal Law Amendment Act, 1958, when any person is charged of possessing pecuniary resources or property which is disproportionate to his known sources of income, for which he cannot satisfactorily account, it may be taken as a relevant fact in deciding whether he is guilty of the particular offence with which he is charged.

The Legal Position

These arise from the Money Laundering Regulations. The Regulations impose a number of statutory obligations on all financial institutions.

• To set up procedures for verifying the identity of clients
• To set up record-keeping procedures for evidence of identity and transactions
• To set up internal reporting procedures for suspicions, including the appointment of a Money Laundering Reporting Officer
• To train relevant employees in their legal obligations
• To train those employees in the procedures for recognizing and reporting suspicions of money laundering.

If employers fail to do this, they are committing an offence, which is punishable by a maximum of 2 years’ imprisonment, a fine, or both.

However, the law also imposes an obligation on people personally and they must take this responsibility seriously. If not, and they knowingly help a money launderer, or if a transaction, a client or a colleague causes them to suspect money laundering – and they fail to report their suspicions they can go to jail. For example “tipping off” someone they are under investigation is an offence and upon conviction punishable by up to five years imprisonment.

Compliance Costs

The Regulations require that financial institutions put in place systems to deter money laundering, and to assist the relevant authorities to detect money laundering activities. In order to do this, it has meant that financial institutions have had to incur additional costs and these costs are most likely to increase in the areas of administration, training and provision of storage space for records.

Administration

Costs occur here because of the need for businesses to obtain evidence of identity from their customers when doing business. They must also keep records of identification evidence and financial dealings for five years. Other costs which may occur would be if an institution had to introduce new systems of control – for example, new computer software, which they would not otherwise have introduced. This will not be the case however, for all businesses. For members of self regulatory organizations, who are already required to identify customers, and for other firms which may require identification for professional reasons, the main change is likely to be in the nature of the evidence required and the time for which it must be kept. Firms that already have well-developed procedures in these areas, such as Banks and Building Societies, will find that the costs of compliance will be relatively lower.

Institutional Arrangements to Combat Money Laundering and Terrorist Financing

Pursuant to the new act, Bangladesh Bank has issued guidelines to banks and financial institutions about the minimum requirements for customer identification and for identification and reporting of unusual or suspicious transactions. Banks and financial institutions have set up their own internal reporting and monitoring procedures accordingly. Training for employees of local banks and financial institutions in developing and adopting these internal procedures was arranged with the help of foreign banks operating in Bangladesh that were familiar with such procedures. Upon receiving reports of suspicious or unusual transactions or of specific money laundering offenses—either from banks and financial institutions or from onsite examinations by Bangladesh Bank‘s own inspectors— the Anti-Money Laundering Department of Bangladesh Bank makes its own preliminary investigation for prima facie evidence of a money laundering offense. Where sufficient prima facie evidence exists, the matter is referred to the Bureau of Anti-Corruption or the police, authorizing them to obtain a court order for formal enquiry. If necessary, the assets in question can be seized or frozen, and the case may proceed to trial and punishment under the act.

Recommendations

Needs for Technical Assistance/Analysis

International organizations may provide financial and technical support useful in setting up an efficient information technology–based financial intelligence unit in the Anti–Money Laundering Department of the Anti-Money Laundering and Combating the Financing of Terrorism Bangladesh Bank. Such support would build up the central bank‘s capacity to collate and analyze large volumes of financial transaction information. Support for information-technology upgrades in larger banks would enable them to better collate inter branch data to identify chains of suspicious transactions. Training support for officials of the Anti–Money Laundering Department and for investigators in the Bureau of Anti-Corruption and the police department would also be important. Bangladesh is not and does not intend to be a host country for laundered money or terrorism finance, as signaled strongly by the recent enactment of the Money Laundering Prevention Act. It is important for Bangladesh that outflows of illegal funds from Bangladesh do not find ready hosts elsewhere; the hundi operators abroad do not funnel away remittances of Bangladeshi workers abroad. Strengthening anti–money laundering surveillance abroad and imposing customer identification and transaction record-keeping requirements on hundi operators in countries that host Bangladeshi workers would be beneficial and important for Bangladesh.

How Financial Institutions Can Combat Money Laundering

The prevention of laundering the proceeds of crime has become a major priority for all jurisdictions from which financial activities are carried out. One of the best methods of preventing and deterring money laundering is a sound knowledge of a customer‘s business and pattern of financial transactions and commitments. The adoption of procedures by which Banks and other Financial Institutions ―know their customers is not only a principle of good business but is also an essential tool to avoid involvement in money laundering. For the purposes of these guidance notes the term Banks and other Financial Institutions refer to businesses carrying on relevant financial business as defined under the legislation. Thus efforts to combat money laundering largely focus on those points in the process where the launderer’s activities are more susceptible to recognition and have therefore to a large extent concentrated on the deposit taking procedures of banks i.e. the placement stage. Institutions and intermediaries must keep transaction records that are comprehensive enough to establish an audit trail. Such records can also provide useful information on the people and organizations involved in laundering schemes.

In complying with the requirements of the Act and in following these Guidance Notes, financial institutions should at all times pay particular attention to the fundamental principle of good business practice – ‘know your customer’. Having a sound knowledge of a customer’s business and pattern of financial transactions and commitments is one of the best methods by which financial institutions and their staff will recognize attempts at money laundering. It will also be dealt with in staff training programs which are a fundamental part of the procedures designed to recognize and combat money laundering.

Responsibilities of Bangladesh Bank

The Act gives Bangladesh Bank broad responsibility for prevention of money laundering and wide-ranging powers to take adequate measures to prevent money laundering, facilitate its detection, monitor its incidence, enforce rules and to act as the prosecuting agency for breaches of the Act. The responsibilities and powers of Bangladesh Bank are, in summary (Section 4 and 5 of the Act):

1. To investigate into all money-laundering offences.
2. Supervise and monitor the activities of banks, financial institutions and other institutions engaged in financial activities.
3. Call for reports relating to money laundering from banks, financial institutions and other institutions engaged in financial activities analyze such reports and take appropriate actions.
4. Provide training to employees of banks, financial institutions and other institutions engaged in financial activities on prevention of money laundering.
5. To authorize any person to enter into any premises for conducting investigations into money laundering offences.
6. Persons authorized by Bangladesh Bank to investigate offences can exercise the same powers as the Officer in Charge of Police Station can exercise under the Code of Criminal Procedure.
7. To do all other acts in attaining the objectives of the Act.
8. The Courts will not accept any offence under the Act for trial unless a complaint is lodged by Bangladesh Bank or any person authorized by Bangladesh Bank in this behalf.

Bangladesh Government can take some initiatives such as:

• Awareness programs and training activities are required for government officials, the private sector and the public
• While effective AML legislation is required, policies must recognize that strict and effective legislation may push money laundering and terrorist financing activities outside of regulated financial sector. Informal financial institutions and players must also be addressed
• There is a need to strengthen existing capacities and expertise available for detecting, preventing and prosecuting money laundering and terrorist financing activities
• Capacity building exercises need to include: (1) Setting up FIU and providing it with adequate technology and infrastructure to detect and track money laundering and terrorist financing activities.
• Assisting financial institutions in the country, particularly the larger banks to strengthen their AML/CFT capacities
• There is need for greater regional cooperation in expediting mutual legal assistance and extradition in the prosecution of money laundering and terrorist financing cases.

Conclusion

Money laundering is one of the ongoing problems facing the international economy, and from the evidence studied while researching this work, it can be seen that while the fundamentals of this crime remains largely the same, technology has offered, and will continue to offer a more sophisticated and circuitous means to convert ill-gotten proceeds into legal tender and assets. The largely unchecked growth of the Internet presents what has been described as the “Armageddon scenario of banking on the `Net – criminals could have money transferred without any audit trail”. There is a total absence of regulation of the Internet and it has been recognized that authorities need to ensure that legislation keeps abreast of technology in order to understand and pick up on any new techniques that professional money launderers may come up with. There is also a growing realization about the extent that money laundering and its relationship with organized crime are interlinked.

The huge profits that accrue to these criminals from such areas as drug trafficking, international fraud, advance fee fraud, long firm fraud, arms dealing, trafficking in human organs and tissue, etc., will be used not only to facilitate ongoing operations, but to consolidate the wealth, prestige and respectability of those in control of the criminal business. Money laundering begins with the fruits of a crime—the underlying or ―predicated offense—and ends with funds that can be used safely or at least with minimal risk, for any purpose.