Study Paper: AML/CFT Regulations for Mobile Money - Policy Options for Bangladesh (2nd Edition 2018)

The Central Bank of Bangladesh released a study and policy paper on AML/CFT regulations and mobile money, with its second edition published in February 2018. It includes suggested policy recommendations to promote the effective and sustainable provision of MFS (mobile financial services) along with addressing financial inclusion goals.

The Governor of the Central Bank of Bangladesh issued the following message as a preamble to the study and describes its contents:

It is my great pleasure to know that Bangladesh Financial Intelligence Unit (BFIU) is going to publish a Study Paper, titled “AML/CFT Regulations for Mobile Money: Policy Options for Bangladesh”. The study has aptly identified the existing and emerging Money Laundering (ML)/Terrorist Financing (TF) risks in the Mobile Financial Services (MFS) of Bangladesh and suggested policy recommendations to promote an effective and sustainable supervisory regime for MFS.

After decades of impressive economic growth, Bangladesh is seeking to move to the next level of prosperity fostering social and financial inclusion so that the benefits of growth can reach the country’s rural and lower-income population. In this effort MFS has enabled us to serve the excluded, the under-served and the unbanked segments of the society. I believe that MFS platform will provide a variety of financial services to unlock and widen further economic opportunities for these segments of population in future. Any threat to this service may deter our broader financial inclusion and also the attaining of the objectives of sustainable development goals. Early detection of risks and vulnerabilities in this service is undoubtedly a praiseworthy effort for timely intervention.

I am glad that as BFIU is moving towards evidence based policy research this study is going to mark a significant step forward. The information, analysis and recommendations contained in the paper will be beneficial to policy makers, service providers, risk managers and researchers at home and abroad. BFIU has already issued a detailed AML/CFT circular for MFS and taken measures to prevent abuses of MFS for illegal delivery of foreign remittances based on the recommendations of the study. The efforts have already begun to yield significant positive outcomes. I hope that some other recommendations of the paper would be implemented phase by phase.

Finally, my heartfelt appreciation goes to the Focus Group for their endeavor to present such an insightful report that will contribute to build a secured, transparent and pro-poor digital finance platform.

It's contents includes the following:

Chapter 1: AML/CFT Regulations for Mobile Money: Global Standards & Practices
1.1 Introduction  15
1.2 Structure of the study paper  15
1.3 Integrity risk in mobile money operations  16
1.4 Challenges related with AML/CFT regulation for m-money  18
1.5 CDD requirements of FATF  18
1.5.1 CDD measures - lower risk scenarios  19
1.5.2 CDD measures – customer identification  20
1.5.3 CDD measures – verification of customer identification  20
1.5.4 CDD measures - identification in non face-to-face scenarios  21
1.5.5 CDD for legal persons  21
1.5.6 Reliance on identification and verification already performed  21
1.5.7 CDD of existing customers 22
1.5.8 CDD measures based on business relationship  22
1.5.9 Enhanced Due Diligence (EDD) if ML/TF is suspected  22
1.5.10 CDD measures - conducting ongoing due diligence and monitoring  22
1.5.11 CDD measures – the specific case of wire transfers  23
1.6 Record-keeping requirements  23
1.7 Suspicious transactions reporting 24
1.7.1 Customer profiling 25
1.7.2 Automated monitoring and internal controls  25
1.8 The use of agents to carry out AML/CFT functions  25
1.8.1 Who can be an agent?  25
1.8.2 AML/CFT functions of the agent and related challenges 26
1.8.3 Know your agents (KYA)  27
1.8.4 Regulatory oversight of agents  27
1.8.5 Specific requirements for MVTS agents  28
1.9 Requirements for new products and technologies 28
1.10 Techniques used to effectively mitigate m-money risks 29
1.10.1 KYC tailored for m-money . 29
1.10.2 Innovative mechanisms for identification  31
1.10.3 Transaction limits  31
1.11 Additional reporting requirements  32
1.12 AML/CFT policy guidance for m-money regulators 32
1.12.1 Designing the broad regulatory framework and approach  32
1.12.2 Issuing guidelines for m-money providers 34
1.12.3 Regulating agents  34
1.12.4 Cooperating and coordinating  35
1.12.5 Supervising and enforcing  36
Chapter 2: Mobile Money in Bangladesh: Risk and Trend  38
2.1 Mobile money in Bangladesh  38
2.2 Risk assessment of m-money in Bangladesh context . 39
2.3 Underlying causes of abuse of MFS in Bangladesh  41
2.4 Abuse of mobile money in Bangladesh  42
2.5 Typologies on abuse of MFS  43
2.5.1 Fraud through auto-theft 43
2.5.2 ‘Hello party’ fraud 43
2.5.3 Fraud by so-called company/firm, expatriate family, etc. 44
2.5.4 Fraud and extortion by ‘Genier Badsha’ (King of Genie)  44
2.5.5 Extortion by the name of top terrorists  45
2.5.6 Abduction/kidnapping for ransom  45
2.5.7 Anonymous transaction (ATr) 46
2.5.8 Abuse of MFS for illegal foreign remittance (Digital hundi) 49
Chapter 3: AML/CFT Regulations for MFS: Policy Options for Bangladesh  51
3.1 Legal framework for regulation of MFS in Bangladesh  51
3.2 Recommendations to mitigate ML/TF risks related with MFS in Bangladesh52
3.2.1 AML/CFT compliance structure of MFS providers  52
3.2.2 Definition of customer  55
3.2.3 Customer identification  55
3.2.4 Customer acceptance policy  55
3.2.5 Account opening procedures for personal account  56
3.2.6 Progressive KYC for personal accounts  57
3.2.7 Transaction profile for personal accounts  58
3.2.8 MFS account linked with bank account. 59
3.2.9 Opening of business/merchant/organizational account  59
3.2.10 Customer due diligence  60
3.2.11 Opening of agent account  61
3.2.12 Opening of distributor account  61
3.2.13 Agent and distributor network monitoring 62
3.2.14 Transaction monitoring 63
3.2.15 Prevention of anonymous transaction and Digital Hundi  63
3.2.16 Risk management for new services or technologies  65
3.2.17 Suspicious Transaction/Activity Report (STR/SAR)  65
3.2.18 Security of cash  65
3.2.19 Self assessment procedures  66
3.2.20 Prevention of financing of terrorism  66
3.2.21 Recruitment/appointment, training & awareness 66
3.2.22 Preservation of records and necessary information/documents  67
3.2.23 Other recommendations  67

Table of Glossary  69

Annexure:
01 Account opening form (personal a/c)  70
02 Account opening form (impersonal a/c)  72
03 Account opening form (information of individuals)  73
04 Indicative list of information/documentary requirements  74
05 Transaction profile (for business/merchant/organizational a/c)  75
06 Account opening form (agent/distributor a/c)  76
07 Transaction profile (for agent/distributor a/c)  77
08 Suspicious transaction/activity report (STR/SAR) format  78

Document Details

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Year of Document: 
2018
Date of Document: 
Thursday, February 1, 2018

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