ML-TF Risk Mgt Guideline-NCC Bank'2022.pdf

MONEY LAUNDERING & TERRORIST FINANCING RISK MANAGEMENT GUIDELINE OF NCC BANK National Credit & Commerce Bank Limited Copyright @ NCC Bank Limited For Internal Use only Save a tree. Do not print unless really needed. Revised on: February, 2022 TONE -- at the -- TOP ’’  Balance your Business with Compliance.  Assess AML/CFT Risks and apply Risk-Based Approach.  Share AML/CFT Knowledge and Create a culture of AML/CFT Awareness.  Be more vigilant so that money launderers and terrorist financers do not use NCC Bank as a bridge.  Prevent Money Laundering, Terrorist Financing, Financing of Proliferation, Trade based Money Laundering & Credit backed Money Laundering.  Emphasize on Trade Based Money Laundering (TBML) risk assessment and mitigation mechanism thereof since major portion of money laundering occurs through Trade Based Money Laundering (TBML).  Ensuring compliance of AML/CFT issues is everyone’s responsibility so perform your duty properly.  Be caution against penalty for non-compliance on AML/CFT Issues, safe your job and safe the Organization.  Read, Share and Comply the instruction of this Guideline. Chief Anti-Money Laundering Compliance Officer সবাই হেল ব হেব মািন ল ািরং, ািরং স ােস অথায়ন AML-CFT CFT Division Head Office Table of Contents CHAPTER: 01 ……………………………………………………………………………………………. …………………………………………………………………………………………….8 MONEY LAUNDERING & TERRORIST FINANCING RISK MANAGEMENT GUIDELINE OF NCC BANK ……………………………………………………………………………………………………..8 …………………………………………………………………………………………………….. 1.1 PREFACE................................................................................................................................................................................................. 8 1.2 OBJECTIVE OF THIS GUIDELINE............................................................................................................................ 8 1.1.1. Broad Objective.............................................................................................................................................. 8 1.1.2. Specific Objective........................................................................................................................................... 8 1.3 GUIDELINE MANAGEMENT................................................................................................................................... 9 1.4 SECRECY MANAGEMENT NAGEMENT...................................................................................................................................... 9 1.5 AN OVERVIEW OF MONEY LAUNDERING AND TERRORIST FINANCING......................... 9 1.6 DEFINING MONEY LAUNDERING....................................................................................................................... 10 1.7 PENALTIES LTIES FOR MONEY LAUNDERING.............................................................................................................. 11 1.8 WHY MONEY LAUNDERING IS DONE................................................................................................................ 12 1.9 HOW THE MONEY LAUNDERING IS DONE....................................................................................................... 12 1.10 PREDICATE OFFENCES......................................................................................................................................... 14 1.11 DEFINING TERRORIST FINANCING..................................................................................................................... 14 1.12 PENALTIES OF TERRORIST FINANCING.............................................................................................................. 15 1.13 THE LINK BETWEEN MONEY LAUNDERING AND TERRORIST FINANCING..................... 15 1.14 WHY NCC BANK MUST COMBAT ML & TF........................................................................................................ 16 1.14.1 Bank Perspective.......................................................................................................................................... 16 1.14.2 Nationall and Social Perspective.................................................................................................................. 16 1.15 RESPONSIBILITIES OF THE REPORTING ORGANIZATIONS IN PREVENTION OF MONEY LAUNDERING................................................................................................................................................................................................... 17 CHAPTER: 02 …………………………………………………………………………………………… ……………………………………………………………………………………………18 INTERNATIONAL AND NATIONAL INITIATIVES ON ML&TF ………………………………18 ……………………………… 2.1 INTRODUCTION................................................................................................................................................................................... 18 2.2 THE UNITED NATIONS........................................................................................................................................ 18 2.2.1 The Vienna na Convention............................................................................................................................... 18 2.2.2 The Palermo Convention............................................................................................................................. 18 2.2.3 International Convention for the Suppression of the Financing of Terrorism......... 18 2.2.4 Security Council Resolution 1267 and Successors..................................................................................... 19 2.2.5 Security Council Resolution 1373 1373................................................................................................................ 19 2.2.6 Security Council Resolution 1540 1540................................................................................................................ 19 2.2.7 The Counter-Terrorism Terrorism Committee................................................................ Committee............................................. 19 2.2.8 Counter-Terrorism Terrorism Implementation Task Force (CTITF)............................................................................ 20 2.2.9 Global Program against Money Laundering.............................................................................................. 20 Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 1 of 120 2.3 THE FINANCIAL ACTION TASK FORCE............................................................................................................... 20 2.3.1 FATF Recommendations.............................................................................................................................. 20 2.3.2 Monitoring toring Members Progress (Mutual Evaluation)................................................................................. 21 2.3.3 The NCCT List............................................................................................................................................................................... 21 2.3.4 International Cooperation and Review Group (ICRG)................................................................................ 21 2.3.5 FATF Public Statement................................................................................................................................. 21 2.4 ASIA PACIFIC GROUP ON MONEY LAUNDERING (APG)................................................................................... 21 2.5 THE EGMONT GROUP OF FINANCIAL INTELLIGENCE UNITS........................................................................... 22 2.6 THE BASEL COMMITTEE ON BANKING SUPERVISION...................................................................................... 22 2.6.1 Statement of Principles on Money Laundering Laundering.......................................................................................... 22 2.6.2 BASEL Core Principles for Banking.............................................................................................................. 23 2.6.3 Customer Due Diligence.............................................................................................................................. 23 2.7 INTRODUCTION................................................................................................................................................................................... 24 2.8 FOUNDING MEMBER OF APG APG............................................................................................................................. 24 2.9 LEGAL FRAMEWORK............................................................................................................................................ 24 2.10 CENTRAL AND REGIONAL EGIONAL TASKFORCES........................................................................................................... 24 2.11 BANGLADESH FINANCIAL INTELLIGENCE UNIT (BFIU)..................................................................................... 24 2.12 NATIONAL COORDINATION COMMITTEE (NCC) AND WORKING COMMITTEE............ 25 2.13 ML & TF RISK ASSESSMENT................................................................................................................................ 25 2.14 NATIONAL STRATEGY FOR PREVENTING ML AND TF...................................................................................... 25 2.15 MONEY LAUNDERING COMPLIANCE OFFICERS’ (CAMLCO) CONFERENCE CHIEF ANTI-MONEY 26 2.16 ANTI MILITANTS AND DE-RADICALIZATION DE COMMITTEE.............................................................................. 26 2.17 MEMORANDUM OF UNDERSTANDING (MOU) BETWEEN ACC & BFIU.......................... 26 2.18 COORDINATED EFFORT ON THE IMPLEMENTATION OF THE UNSCR............................ 26 2.19 MEMORANDUM OF UNDERSTANDING (MOU) - BFIU AND OTHER FIUs....................... 26 2.20 RISK BASED APPROACH...................................................................................................................................... 26 CHAPTER: 03 …………………………………………………………………………………………… ……………………………………………………………………………………………27 AML & CFT COMPLIANCE PROGRAM OF NCC BANK ………………………………………. ……………………………………….27 3.1 INTRODUCTION................................................................................................................................................................................... 27 3.2 COMPONENT OF AML & CFT COMPLIANCE PROGRAM.................................................................................. 27 3.3 DEVELOPMENT OF BANK’S AML & CFT COMPLIANCE PROGRAM................................. 27 3.4 COMMUNICATION OF COMPLIANCE PROGRAM............................................................................................. 27 3.5 SENIOR MANAGEMENT ROLE............................................................................................................................ 28 3.5.1 Role of Senior Management....................................................................................................................... 28 3.5.2 Statement of Commitment of CEO & MD.................................................................................................. 28 3.5.3 Senior Management Commitment & Policy Statement:........................................................................... 29 Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 2 of 120 3.6 HR POLICY............................................................................................................................................................................................ 29 COMPLIANCE STRUCTURE OF NCC BANK 30 3.7 INTRODUCTION: COMPLIANCE STRUCTURE OF NCC BANK........................................................................... 30 3.7.1 The Functional Organogram on AML & CTF Compliance......................................................................... 30 3.8 CENTRAL COMPLIANCE COMMITTEE (CCC):..................................................................................................... 30 3.8.1 Formation of CCC......................................................................................................................................... 31 3.8.2 ToR (Term of Reference) of CCC for AML & CTF Compliance:.................................................................. 31 3.8.3 Secretariat..................................................................................................................................................................................... 31 3.8.4 Reporting...................................................................................................................................................................................... 31 3.8.5 Separation of CCC CC from Internal Control & Compliance (ICC)................................. 32 3.9 CHIEF ANTI MONEY LAUNDERING COMPLIANCE OFFICER (CAMLCO).......................... 32 3.10 DEPUTY CHIEF ANTI MONEY LAUNDERING COMPLIANCE OFFICER (DCAMLCO)......... 32 3.11 AML-CFT DIVISION:............................................................................................................................................................................. 32 3.11.1 Policy & Guidelines:..................................................................................................................................... 33 3.11.2 Statement & Returns:.................................................................................................................................. 33 3.11.3 Monitoring & Compliance:.......................................................................................................................... 34 3.11.4 Training & Awareness:................................................................................................................................. 34 3.12 BRANCH ANTI MONEY LAUNDERING COMPLIANCE OFFICER (BAMLCO)..................... 34 3.13 DIVISIONAL FOCAL PERSONS ON AML/CFT COMPLIANCE............................................................................. 35 3.14 INTERNAL CONTROL AND COMPLIANCE.......................................................................................................... 35 3.15 EXTERNAL AUDITOR............................................................................................................................................ 35 3.16 INITIATIVES BY THE HUMAN RESOURCES DIVISION........................................................................................ 35 3.17 INDIVIDUAL ROLES & RESPONSIBILITIES:.......................................................................................................... 36 3.17.1 Managing Director & Chief Executive Officer (MD & CEO): CEO):...................................................................... 36 3.17.2 The Central Compliance Committee (CCC):............................................................................................... 36 3.17.3 The Chief Anti-Money Money Laundering Compliance Officer (CAMLCO):......................... 37 3.17.4 The Member of Central Compliance Committee (CCC):............................................................................ 37 3.17.5 Deputy CAMLCO & Head of AML-CFT AML Division:........................................................................................ 38 3.17.6 AML-CFT CFT Division:........................................................................................................................................ 39 3.17.7 The Branch Anti--Money Money Laundering Compliance Officer (BAMLCO):...................... 40 3.17.8 Divisional Focal Persons on AML/CFT Compliance:................................................................................... 41 3.17.9 The ICC Division:.......................................................................................................................................... 41 3.17.10 Branch Manager (BM) & other Officials of the Branch.......................................................................... 42 CHAPTER: 04 …………………………………………………………………………………………… ……………………………………………………………………………………………45 CUSTOMER DUE DILIGENCE………………………………………………………………………………… DILIGENCE ………………………………………45 4.1 INTRODUCTION................................................................................................................................................................................... 45 Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 3 of 120 4.2 LEGAL OBLIGATIONS OF CDD............................................................................................................................ 45 4.3 CONSIDERING IDERING CUSTOMER RELATED RISK, CDD ARE TO BE PERFORMED IN BELOW NUMEROUS STEPS:......................................................................................................................................................................................... 46 4.4 ESSENTIAL REQUIREMENTS OF CUSTOMER DUE DILIGENCE: DILIGENCE......................................................................... 46 4.5 BENEFICIAL OWNER............................................................................................................................................ 47 4.5.1 Ways in which beneficial ownership information can be hidden / obscured:......... 47 4.5.2 Examples of Beneficial Ownership structure:............................................................................................. 48 4.5.3 Determination of Beneficial Owner............................................................................................................. 49 4.6 SIMPLIFIED CUSTOMER DUE DILIGENCE:.......................................................................................................... 50 4.7 OTHER DIRECTIONS REGARDING CUSTOMER DUE DILIGENCE...................................................................... 51 4.8 WHEN CUSTOMER DUE DILIGENCE CANNOT BE POSSIBLE POSS............................................................................ 51 4.9 ENHANCED DUE DILIGENCE (EDD).................................................................................................................... 51 4.9.1 Enhanced Due Diligence (EDD) includes but not limited to the following:............. 52 4.9.2 Notes to Enhanced Due Diligence (EDD):................................................................................................... 52 4.9.3 Transaction Profile (TP)................................................................................................................................ 53 4.10 TRANSACTION MONITORING............................................................................................................................ 53 4.10.1 Monitoring of Customer Transaction and Activity..................................................................................... 54 4.11 Know Your Customer (KYC) Procedure.............................................................................................................. 55 4.12 CUSTOMER IDENTIFICATION.............................................................................................................................. 56 4.13 VERIFICATION OF SOURCE OF FUNDS.............................................................................................................. 57 4.14 VERIFICATION OF ADDRESS............................................................................................................................... 57 4.15 PERSONS WITHOUT STANDARD IDENTIFICATION DOCUMENTATION.......................... 57 4.16 NON FACE TO FACE CUSTOMERS...................................................................................................................... 58 4.17 CORRESPONDING BANKING.............................................................................................................................. 58 4.18 POLITICALLY EXPOSED PERSONS PERSONS (PEPs), INFLUENTIAL PERSONS (DOMESTIC PEPs) AND CHIEF EXECUTIVES OR TOP LEVEL OFFICIALS OF ANY INTERNATIONAL ORGANIZATION: …………………………………………………………………………………………………. ………………………………………………………………………………………………….59 4.18.1 Politically Exposed Persons (PEPs).............................................................................................................. 60 4.18.2 Who are Politically Exposed Persons (PEPs)?............................................................................................. 60 4.18.3 high ranking positions in an international organization Chief or similar high-ranking organizat................ 60 4.18.4 Who should be considered a family member of a PEP?............................................................................ 60 4.18.5 Close associates’ of a PEP:........................................................................................................................... 61 4.18.6 Various scenario related with PEPs/IPs....................................................................................................... 61 4.18.7 PEPs versus Risk........................................................................................................................................... 61 4.19 PAYMENT AND SETTLEMENT SYSTEM............................................................................................................... 66 4.20 NEW TECHNOLOGY & SERVICES........................................................................................................................ 66 4.21 ONEY LAUNDERING THROUGH CREDIT CARD AND MERCHANT................................ 66 MONEY Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 4 of 120 4.22 WIRE TRANSFER................................................................................................................................................................................... 69 4.23 RELIANCE ON THIRD PARTY............................................................................................................................... 70 4.24 MANAGEMENT AGEMENT OF LEGACY ACCOUNTS........................................................................................................... 71 4.25 COMPLIANCE OF BRANCHES AND SUBSIDIARIES............................................................................................ 71 CHAPTER: 05 …………………………………………………………………………………………… ……………………………………………………………………………………………72 DOCUMENTATION AND RECORD KEEPING ……………………………………………….. ………………………………………………..72 5.1 INTRODUCTION................................................................................................................................................................................... 72 5.2 LEGAL OBLIGATIONS........................................................................................................................................... 72 5.3 OBLIGATIONS UNDER CIRCULAR....................................................................................................................... 72 5.4 LIST OF RECORDS TO BE KEPT............................................................................................................................ 72 5.5 TRAINING RECORDS............................................................................................................................................ 73 5.6 REQUIRED DOCUMENTATION AND RETENTION PERIOD AT NCC BANK:...................... 73 5.6.1 Documentation Objectives.......................................................................................................................... 73 5.6.2 Documentation Requirements.................................................................................................................... 73 5.6.3 Documents Verifying Evidence of Identity and Transaction Records....................... 74 5.7 CUSTOMER INFORMATION................................................................................................................................ 74 5.8 TRANSACTIONS................................................................................................................................................................................... 74 5.9 INVESTIGATIONS................................................................................................................................................................................. 74 5.10 INTERNAL AND EXTERNAL REPORTS................................................................................................................. 75 5.11 OTHER MEASURES............................................................................................................................................................................... 75 5.12 FORMATS AND RETRIEVAL OF RECORDS.......................................................................................................... 75 CHAPTER: 06 …………………………………………………………………………………………… ……………………………………………………………………………………………77 REGULATORY REPORTING (Report to BFIU) ……………………………………………….. ………………………………………………..77 6.1 LEGAL OBLIGATIONS........................................................................................................................................... 77 6.2 SUSPICIOUS TRANSACTION/ACTIVITY REPORTING......................................................................................... 77 6.2.1 Reporting Requirement:.............................................................................................................................. 77 6.2.2 Definition finition of Suspicious Transaction.......................................................................................................... 77 6.2.3 REPORTING PROCESS:................................................................................................................................. 77 6.2.4 IDENTIFICATION OF STR/SAR:.................................................................................................................... 78 6.2.5 EVALUATION:............................................................................................................................................................................... 79 6.2.6 DISCLOSURE................................................................................................................................................................................. 79 6.2.7 DOCUMENTING REPORTING DECISIONS.................................................................................................. 80 6.2.8 REPORTING GUIDANCE............................................................................................................................... 80 6.2.9 SOME SPECIAL SCENARIOS FOR REPORTING REPORTING............................................................................................ 81 6.2.10 TIPPING OFF................................................................................................................................................................................. 81 6.2.11 PENALTY....................................................................................................................................................................................... 81 Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 5 of 120 6.2.12 PENALTY OF TIPPING OFF........................................................................................................................... 81 6.2.13 SAFE HARBOR PROVISION.......................................................................................................................... 82 6.2.14 RED FLAGS.................................................................................................................................................................................... 82 6.3 CASH TRANSACTION REPORT (CTR).................................................................................................................. 82 6.4 SELF ASSESSMENT REPORT & INDEPENDENT TESTING PROCEDURE:............................ 84 6.4.1 Responsibilities of Branches:....................................................................................................................... 84 6.4.2 Responsibilities of ICCD:.............................................................................................................................. 85 6.4.3 Responsibilities of AML AML-CFT Division:........................................................................................................ 85 CHAPTER: 07 …………………………………………………………………………………………… ……………………………………………………………………………………………87 RECRUITMENT, TRAINING AND AWARENESS ……………………………………………….. ………………………………………………..87 7.1 OBLIGATIONS UNDER CIRCULAR....................................................................................................................... 87 7.2 EMPLOYEE SCREENING....................................................................................................................................... 87 7.3 KNOW YOUR EMPLOYEE (KYE)........................................................................................................................... 87 7.4 TRAINING FOR EMPLOYEE.................................................................................................................................. 87 7.4.1 The Need for Staff Awareness..................................................................................................................... 88 7.4.2 Education and Training Programs............................................................................................................... 88 7.4.3 New Employees............................................................................................................................................ 88 7.4.4 Customer Service/Relationship Managers/Tellers/Foreign Exchange Dealers........ 88 7.4.5 Training on Trade Trade-based Money Laundering............................................................................................. 89 7.4.6 Training on Credit Back Money Laundering............................................................................................... 89 7.4.7 Processing (Back Office) Staff...................................................................................................................... 89 7.4.8 Branch Managers......................................................................................................................................... 89 7.4.9 Branch Anti-Money Money Laundering Compliance Officer (BAMLCO).............................. 89 7.4.10 Divisional Focal Person on AML/CFT Compliance & Related Divisional Employees90 7.4.11 Refreshers Training...................................................................................................................................... 90 7.4.12 Online Assessment of Staffs’ AML/CTF Knowledge................................................................................... 90 7.4.13 Resource Persons for AML/CTF Training Programs................................................................................... 90 7.5 AWARENESS OF SENIOR MANAGEMENT.......................................................................................................... 90 7.6 CUSTOMER AWARENESS.................................................................................................................................... 91 7.7 AWARENESS OF MASS PEOPLE.......................................................................................................................... 91 CHAPTER: 08 …………………………………………………………………………………………… ……………………………………………………………………………………………92 TERRORIST FINANCING & PROLIFERATION FINANCING ……………………………………….92 ………………………………………. 8.1 INTRODUCTION................................................................................................................................................................................... 92 8.2 LEGAL OBLIGATIONS........................................................................................................................................... 92 8.3 OBLIGATIONS UNDER CIRCULAR....................................................................................................................... 92 8.4 NECESSITY OF FUNDS BY TERRORIST................................................................................................................ 92 Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 6 of 120 8.5 SOURCES OF FUND/RAISING OF FUND............................................................................................................. 93 8.6 MOVEMENT OF TERRORIST FUND..................................................................................................................... 93 8.6.1 Formal Financial Sector................................................................................................................................ 93 8.6.2 Trade Sector................................................................................................................................................................................. 93 8.6.3 Cash Couriers................................................................................................................................................................................ 93 8.6.4 Use of Alternative native Remittance Systems (ARS)............................................................................................ 94 8.6.5 Use of Charities and Non-Profit Non Organizations......................................................................................... 94 8.7 TARGETED FINANCIAL SANCTIONS................................................................................................................... 94 8.8 AUTOMATED SCREENING MECHANISM OF UN, OFAC, EU, UK & LOCAL SANCTION LIST …………………………………………………………………………………………………..95 ………………………………………………………………………………………………….. 8.8.1 ROLE OF NCC BANK IN PREVENTING TF & PF.......................................................................................... 95 CHAPTER: 09 …………………………………………………………………………………………… ……………………………………………………………………………………………97 RISK MANAGEMENT…………………………………………………………………………………………... …………………………………………………………………………………………... …………………………………………………………………………………………...97 9.1 RISK CATEGORIZATION, BASED ON ACTIVITY/KYC PROFILE........................................................................... 97 9.1.1 Risk Rating:................................................................................................................................................................................... 97 9.1.2 Risk Assessment: ent:.......................................................................................................................................... 97 9.1.3 Judgmental Risk Assessment:...................................................................................................................... 97 9.1.4 Annual Update of KYC and Transaction Profile:......................................................................................... 97 9.1.5 OFFICIAL STAMP.......................................................................................................................................... 97 9.2 RISK-BASED APPROACH PPROACH (RBA)........................................................................................................................... 97 9.2.1 Country Risk................................................................................................................................................................................. 98 9.2.2 Customer Risk............................................................................................................................................................................... 98 9.2.3 Product Risk.................................................................................................................................................................................. 98 9.3 RISK ASSESSMENT GUIDELINE ON MONEY LAUNDERING AND TERRORIST FINANCING …………………………………………………………………………………………………. ………………………………………………………………………………………………….99 9.4 SAMPLE RISKS REGISTER AS PER RISK ASSESSMENT GUIDELINE:................................................................... 99 9.5 SOME IMPORTANT ISSUES ON RISK MANAGEMENT:.................................................................................... 116 9.5.1 Risk Management Strategies..................................................................................................................... 116 9.5.2 Ongoing Risk Monitoring.......................................................................................................................... 117 9.5.3 Higher Risk Scenario.................................................................................................................................. 117 CHAPTER: 10 …………………………………………………………………………………………. ………………………………………………………………………………………….119 CUSTOMER ACCEPTANCE POLICY ……………………………………………………………….. ………………………………………………………………..119 CHAPTER: 11 …………………………………………………………………………………………. ………………………………………………………………………………………….119 &TRADE BASED MONEY LAUNDERING AND FINANCING OF INTERNATIONAL TRADE &TRADE-BASED TERRORISM ………………………………………………………………………………………… …………………………………………………………………………………………119 LIST OF ABBREVIATIONS........................................................................................................................................................................... 120 Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 7 of 120 CHAPTER: 01 MONEY LAUNDERING & TERRORIST FINANCING RISK MANAGEMENT GUIDELINE OF NCC BANK 1.1 PREFACE The Bangladesh Financial Intelligence Unit (BFIU) is a Bangladesh government agency responsible for investigating money laundering, suspicious transactions, and cash transaction reports instructed banks to assess their own ML & TF risk considering their customers, products, delivery channels and geographical positions. They were also instructed to assess regulatory risk i.e. risk arises from non-compliance non of AML & CFT measures. All the banksanks have submitted their ML & TF risk assessment reports to BFIU for complying with the instruction. The committee has taken those risk assessment reports into consideration to formulate this Guideline. To comply with the BFIU requirement and to cope up with w recent AML/CFT regulatory changes, NCC Bank has made this revision and going issue the ‘MONEY MONEY LAUNDERING & TERRORIST FINANCING RISK MANAGEMENT GUIDELINE OF NCC BANK’ BANK for internal uses. regulatoryy framework for anti The purpose of this guidance is to outline the legal and regulator anti-money laundering and combating financing of terrorism (AML/CFT) requirements and systems across the Bank. With a view to this, the document interprets the requirements of the relevant laws and regulations, and how they may be implemented ed in practice. It indicates good industry practices in AML and CFT procedures through a based approach; and assists the banks to design and implement the systems and proportionate, risk-based connection with money laundering and controls necessary to mitigate the risks of the banks being used in connection the financing of terrorism. In a boarder context, this verview on Money Laundering and Terrorist Financing, his guideline will cover the overview National & International Initiatives to prevent Money Laundering and Terrorist Financing, Financ Policies & Procedures (AML/CFT Policy, Customer Acceptance Policy, TBML Policy, KYC/CDD/EDD Standards etc.), Officers, Independent AML/CFT Compliance structure of NCC Bank including designating the Compliance Officers Audit Function, Documentation and record keeping standards, Transaction Monitoring & Reporting standards to BFIU , Training and awareness, Terrorist Financing & Proliferation Financing preventive Measures Risk assessment & management including risk register etc. This measures,, Sanction Screening Measures, guideline will also help to assess and to manage the AML/CFT Risk resides in the Bank’s Product, Service & Delivery channel. 1.2 OBJECTIVE OF THIS GUIDELINE 1.1.1. Broad Objective To ensure a Compliance Culture to be established by adopting Risk Based Approach within the Bank to prevent Money Laundering and Terrorist Financing and this control to be managed through stringent and appropriate procedures in order to discharge our legal and moral duties. 1.1.2. Specific Objective Apart from these broad objectives, the specific objectives are: * To make NCC Bank’s staff aware of National & International Act, Policy & Procedure to prevent Money Laundering & Terrorist Financing; * To focus on the methods of Prevention of Money Laundering and Combating Combat the Financing of Terrorism; * To prevent the NCC Bank’s products or services from being used as a channel for Money Laundering and Financing of Terrorism; * To prevent damage to the NCC Bank’s name and reputation by associating with money Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 8 of 120 rorists financers or proliferation financer of weapon of mass destruction; launderers or terrorists * To ensure that NCC Bank complies with Money Laundering prevention and Anti Anti- Terrorism legislation/regulations; * investigate and track money To assist regulators/law enforcement agencies in their efforts to investigate launderers & terrorist financers. 1.3 GUIDELINE MANAGEMENT * CAMLCO will be in an authority to explain the sense and sentiment of the Guideline. Laws of the land are to be considered as superior to any policy and process of the banking system. However, in case of any unintentional contradiction prevails or develops in future, international standards and laws and regulations adopted by the Government of Bangladesh and all relevant laws of land in force in Bangladesh, guidelines of Bangladesh Financial Intelligence Unit (BFIU) shall prevail. * CAMLCO shall be the custodian of the Guideline. AML-CFT CFT Division will coordinate the review and up gradation process of Guideline in conjunction with Central Compliance Committee (CCC). * This Guideline shall be applicable across the NCC Bank. Policy to be executed by various Subsidiaries, Branches, Upa-Shakha & Other Business Units) and risk operations, business (Subsidiaries, divisions. Support divisions shall have direct and specific role in policy implementation. implementa After approval various aspects/issues of the Guideline to be brought into the notice of the respective divisions/functional units. While conducting such process, few amendments and corrections may be necessary; this may warrant a comprehensive review shortly. * As per requirement of BFIU, NCC Bank has prepared its own Guideline approved by the Board of Directors to prevent money laundering laun ccordingly, the changes of the and terrorist financing, accordingly, Guideline is to be approved by the Board of NCC Bank. MD’s approval suffices for the changes of policy as recommended by CAMLCO, which to b e ratified by Board of NCC Bank. be * All circulars, instructions and guidelines of BFIU and the laws of land shall be superior to this t Guideline. * Guideline shall be applicable upon approval by the Board of Directors. This Guideline is brought under the notice of all members of NCC Bank family via a general circulation displaying the same in intranet system of the NCC Bank. * Formulation and review of this Guideline will be initiated by AML-CFT CFT Division in every 3(three) years. CAMLCO/CCC will form an ad hoc committee with the mix of related business, operation ad-hoc and support units of the bank to perform the review of the existing policy and provide AML CFT Division will take the necessary step to recommendation (if any) to update the policy. AML-CFT update the policy as per the recommendation (if not contradict with regulatory requirement) Bangladesh Government & BFIU. and/or adaptation of update law & guideline given by Bangladesh * Changes to this Guideline shall require approval of the Board of Directors. Changes in operating procedures, standards and technologies, may be authorized by the MD & CEO and CAMLCO provided they are consistent with this Guideline; * Senior Management shall be responsible for ensuring the directives implemented and administered in compliance with the approved Guideline. 1.4 SECRECY MANAGEMENT This is an intellectual property of NCC Bank and this is only for the internal use. The External Externa use either partial or full, amendment and or use for personal benefit are strictly prohibited without proper consent of Bank Management. No officials at any level of NCC Bank shall divulge any information regarding the transactions or any other information, at any stage to its customer or any reported unusual or suspicious tran other person, so that investigation procedure is hampered or influenced adversely. Also the officials will maintain strict confidentiality as per MLPA-2012 MLPA since tipping-off is legally prohibited. 1.5 AN OVERVIEW OF MONEY LAUNDERING AND TERRORIST FINANCING Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 9 of 120 Money Laundering is being done by launderers worldwide to conceal the proceed proceeds earned from criminal activity.. It happens in almost every country in the world, and a single scheme typically involves transferring money through several countries in order to obscure its origins. And the rise of global financial markets makes money laundering easier than ever, making it possible to anonymously deposit proceeds of crime in one country and then have it transferred to any other country for use. Money laundering has a major impact on a country’s economy as a whole, impeding the social, economic, political, and cultural development of a society. Both money laundering and terrorist financing can weaken individual financial institution, and they are also threats to a country’s overall financial sector therefore, a key element in promoting reputation. Combating money laundering and terrorist financing is, therefore, a strong, sound and stable financial sector. The process of money laundering and terrorist financing (ML/TF) is very dynamic and ever evolving. The complicated and sophisticated money launderers and terrorist financers are inventing more and more complicated procedures and using new technology for money laundering and terrorist financing. To address these emerging challenges, the global community has taken various initiatives against ML & TF. In accordance with international initiatives, s, Bangladesh has also acted on many fronts. 1.6 DEFINING MONEY LAUNDERING Money laundering can be defined in a number of ways. But the fundamental concept of money laundering is the process by which proceeds from a criminal activity is disguised to conceal their illicit origins. definition which was delineated in the United Nations Most countries adopted to the following definition Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988) (the Vienna Convention) and the United Nations Convention Against Transnational Organized Crime (2000) (the Palermo Convention):  The conversion or transfer of property, knowing that such property is derived from any offense, e.g. drug trafficking, or offenses or from an act of participation in such offense or offenses, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such an offense or offenses to evade the legal consequences of his actions;  The concealing or disguising the true nature, source, location, disposition, movement, rights righ with respect to, or ownership of property, knowing that such property is derived from an offense or offenses or from an act of participation in such an offense or offenses, and;  The acquisition, possession or use of property, knowing at the time of receipt rec that such property was derived from an offense or offenses or from an act of participation in such offense or offenses. The Financial Action Task Force (FATF), the international standard setter for anti money laundering (AML) anti-money and combating financing of terrorism (CFT) efforts, recommends that money laundering should criminalized in line with the Vienna Convention and Palermo Convention. Like other countries of the world, Bangladesh has criminalized money laundering in line with those conventions. oreover, Bangladesh also considers some domestic concerns like ‘smuggling of money or property from Moreover, Bangladesh’ in criminalizing money laundering. Section 2 (v) of Money Laundering Prevention Act (MLPA), 2012 of Bangladesh defines money laundering as follo follows: ‘Money laundering’ means – i. knowingly moving, converting, or transferring proceeds of crime or property involved in an offence for the following purposes:- Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 10 of 120 1. concealing or disguising the illicit nature, source, location, ownership or control of the proceeds of crime; or 2. assisting any person involved in the commission of the predicate offence to evade the legal consequences of such offence; ii. smuggling money or property earned through legal or illegal means to a foreign country; iii. knowingly transferring or remitting the proceeds of crime to a foreign country or remitting or bringing them into Bangladesh from a foreign country with the intention of hiding or disguising its illegal source; or iv. concluding or attempting to conclude financial transactions in such a manner so as to reporting requirement under this Act may be avoided; v. converting or moving or transferring property with the intention to instigate or assist for committing a predicate offence; vi. acquiring, possessing or using any property, knowing that such property is the proceeds of a predicate offence; vii. performing such activities so as to the illegal source of the proceeds of crime may be concealed or disguised; viii. Participating in, associating with, conspiring, attempting, abetting, instigating or counseling to commit any offences mentioned above. 1.7 PENALTIES FOR MONEY LAUNDERING Money laundering is a criminal offence under section 4(1) of MLPA, 2012 (including amendments) and non compliance of the provisions of the law are as follows- penalties for money laundering offence and non-compliance follows Offence Reference Penalties Committing money Sub sections 1, For person: Imprisonment for a term of at least 4 years but not laundering, a criminal 2, 3, 4 & 5 of exceeding 12 years and in addition fine equivalent to the twice of offence Section tion 4, the value of the property involved in the offence or BDT 10 lac, MLPA, 2012 whichever is greater. including amendments) For entity: A fine of not less than twice of the value of the property or BDT 20 lac, whichever is greater and in addition to this the registration of the said entity shall be liable to be cancelled. Non-compliance Reference Penalties Failure to provide with Sec 23(3) of Maximum BDT 5 lac fine at the rate of BDT 10 Thousand per day. required information on MLPA, 2012 Even cancellation of license if fined more than 3 occasions in a year. time (including amendments) Providing wrong & Sec 23(4) of Maximum BDT 5 lac fine with a minimum of BDT 20 thousand. Even false information by MLPA, 2012 cancellation of license if fined more than 3 occasions. occasions the institution (including amendments) Failure of reporting Sec. 23(5) of Maximum BDT 5 lac fine at the rate of BDT 10 thousand per day. institutions to comply MLPA, 2012 Even cancellation of license with the direction of (including if fined more than 3 occasions in a year. BFIU. amendments 2015) Failure to comply with Sec. 23(6) of Not less than the balance held on that account the freezing order MLPA, 2012 but not more than twice of the balance held at the time of issuing (including the order. amendments) Individual responsible Sec 23(8) of If any reporting organization is imposed fine under sub sub-sections (3), in the entity for non- MLPA, 2012 (4) (5) & (6) BFIU may also impose a fine not less than BDT 10 compliance (including thousand but not exceeding BDT 5 lac on the responsible owner, amendments) directors, officers and staff or persons employed on contractual basis of that reporting organization and, where necessary, may direct the essary administrative actions. relevant organization to take necessary Failure to comply with the Sub section (1 provision of sub- section (1) & 2) of section (a) Fine at least BDT 50 thousand but not exceeding BDT 25 lac on of section 25 25, MLPA, 2012 the reporting organization. a. Not to maintain complete (including Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 11 of 120 and correct information of amendments) (b) In addition to the above, cancel the license of the organization customer (KYC). and branches, service centers, booths or agents or as the case may b. Not to preserve records be. of transaction at least 5 years after termination of relationship. c. Not to provide with the above Information to BFIU as per their requirement. d. Not to submit suspicious transaction report spontaneously to BFIU for unusual/ doubtful transaction. 1.8 WHY MONEY LAUNDERING LAUNDER IS DONE  First, money represents the lifeblood of the organization/person that engages in criminal conduct for financial gain because it covers operating expenses and pays for an extravagant lifestyle. To spend money in these ways, criminals must make the money they derived illegally appear legitimate.  Second, a trail of money from an offense to criminals can become incriminating evidence. Criminals must obscure or hide the source of their wealth or alternatively disguise ownership or control to ensure that illicit proceeds are not used to prosecute them. them  Third, the proceeds from crime often become the target of investigation and seizure. To shield ill ill- gotten gains from suspicion and protect them from seizure, criminals must conceal their existence or, alternatively, make them look legitimate. 1.9 HOW THE MONEY LAUNDERING IS DONE There is no single method of laundering money. Methods can range from the purchase and resale of a luxury item (e.g. a house, car or jewelry) to passing money through a complex international web of i.e. those companies that primarily exist only as named legal legitimate businesses and ‘shell’’ companies (i.e. entities without any trading or business activities).There are a number of crimes where the initial proceeds usually take the form of cash that needs to enter the financial system by some means. Bribery, extortion, robbery and street level purchases of drugs are almost always made with cash. These proceeds of crime have to enter the financial system by some means so that it can be converted into a form which can be concealed or transported. The methods of achieving this are limited only by the more easily transformed, concealed ingenuity of the launderer and these methods have become increasingly sophisticated. Despite the variety of methods employed, money laundering is not a single act but a process accomaccomplished in 3 basic stages which are as follows: Stage One: Placement — The physical disposal of cash or other assets derived from criminal activity. During this phase, the money launderer introduces the illicit proceeds into the financial system. Often, this is accomplished by placing the funds into circulation through formal financial institutions, casinos, and other legitimate businesses, both domestic and international. Examples of placement transactions include:  Blending of funds: Comingling of ille gitimate funds with legitimate funds such as placing the cash illegitimate from illegal narcotics sales into cash cash-intensive locally owned restaurant  Foreign exchange: Purchasing of foreign exchange with illegal funds  Breaking up amounts: Placing cash in small amounts and and depositing them into numerous bank accounts in an attempt to evade reporting requirements  Currency smuggling: Cross border physical movement of cash or monetary instruments Cross-border Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 12 of 120  Loans: Repayment of legitimate loans using laundered cash. cash Stage Two: Layering — The separation of illicit proceeds from their source by layers of financial transactions intended to conceal the origin of the proceeds. This second stage involves converting the ncial transactions to obfuscate proceeds of the crime into another form and creating complex layers of financial the source and ownership of funds. Examples of layering transactions include:  Electronically moving funds from one country to another and dividing them into advanced financial options and or markets  Moving funds from one fin ancial institution to another or within accounts at the same institution financial  Converting the cash placed into monetary instruments  Reselling high value goods and prepaid access/stored value products  Investing in real estate and other legitimate businesses  Placing money in stocks, bonds or life insurance products  Using shell companies to obscure the ultimate beneficial owner and assets assets. Stage Three: Integration — Supplying apparent legitimacy to illicit wealth through the re-entry re of the funds into the economy in what appears to be normal business or personal transactions. This stage entails using laundered proceeds in seemingly normal transactions to create the perception of legitimacy. The launderer, for instance, might choose to invest the funds in re al estate, financial ventures or luxury assets. real By the integration stage, it is exceedingly difficult to distinguish between legal and illegal wealth. This stage provides a launderer the opportunity to increase his wealth with the proceeds of crime. Integration Integr is generally difficult to spot unless there are great disparities between a person’s or company’s legitimate employment, business or investment ventures and a person’s wealth or a company’s income or assets. Examples of integration transactions include: incl  Purchasing luxury assets like property, artwork, jewelry or high end automobiles  Getting into financial arrangements or other ventures where investments can be made in business enterprises. Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 13 of 120 1.10 PREDICATE OFFENCES “Predicate Offence” means the offences mentioned below, by committing which within or outside the country, the money or property derived from is laundered or attempt to be laundered, namely:- namely: 1. Corruption and bribery; 2. Counterfeiting currency; 3. Counterfeiting deeds and documents; 4. Extortion; 5. Fraud; 6. Forgery; 7. Illegal trade of firearms; 8. Illegal trade in narcotic drugs, psychotropic substances and substances causing intoxication; 9. Illegal trade in stolen and other goods; 10. Kidnapping, illegal restrain and hostage taking; 11. Murder, grievous physical injury; 12. Trafficking of women and children; 13. Black marketing; 14. Smuggling of domestic and foreign currency; 15. Theft or robbery or dacoity or piracy or hijacking of aircraft; 16. Human trafficking; 17. Dowry; 18. Smuggling and offences related to customs and excise duties; 19. Tax related offences; 20. Infringement of intellectual property rights; 21. Terrorism or financing in terrorist activities; 22. Adulteration or the manufacture of goods through infringement of title; 23. Offences relating to the environment; 24. Sexual exploitation; 25. Insider trading and market manipulation using price sensitive information relating to the capital market in share transactions before it is published for general information to take advantage of institutional gain; the market and attempting to manipulate the market for personal or institutional 26. Organized crime, and participation in organized criminal groups; 27. Racketeering; and 28. Any other offence declared as predicate offence by BFIU, Bangladesh bank, with the approval of the government, by notification in the official gazette, for the purpose of this act. 1.11 DEFINING TERRORIST FINANCING Terrorist financing can simply be defined as financial support, in any form, of terrorism or of those who encourage, plan, or engage in terrorism. The International Convention for the Suppression of the Financing of Terrorism (1999) under the United Nations defines TF as follows: 1. If any person commits an offense by any means, directly or indirectly, unlawfully and willingly, provides or collects funds with the intention that they should be used or or in the knowledge that they are to be used, in full or in part, in order to carry out: a. An act which constitutes an offence within the scope of and as defined in one of the treaties listed in the link (International Convention for the Suppression of the Financing F of Terrorism (1999), Article 2, http://www.un.org/law/cod/finterr.htm. The treaties referred to annex in sub-paragraph paragraph 1(a) shall be available in this web link) link); or b. Any other act intended to cause death or serious bodily injury to a civilian, or to any other person not taking any active part in the hostilities in a situation of armed conflict, when the Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 14 of 120 purpose of such act, by its nature or context, is to intimidate a population, or to compel a government or an international organization to do or to abstain from doing an act. 2. For an act to constitute an offense set forth in the preceding paragraph 1, it shall not be necessary that the funds were actually used to carry out an offense referred to in said paragraph 1, subparagraph (a) or (b). Bangladesh has ratified this convention and criminalized terrorism or terrorist activities under section 6(1) nine) conventions and protocols that of Anti Terrorism Act, 2009 in line with the requirement set out in 9 ((nine) were annexed in the convention. Section 7(1) of Anti Terrorism Act (ATA), 2009, defines terrorist financing as follows- follows If any person or entity willfully provides, receives, collects or makes arrangements for money, service or any other property, whether from legitimate or illegitimate source, by any means, directly or indirectly, with the intention that, it would, in full or in part, be used- a. to carry out terrorist activity; b. by a terrorist person or entity for any purpose, or is in the knowledge that it may be used by a terrorist person or entity; the said person or entity shall be deemed to have committed the offence of terrorist financing. 1.12 PENALTIES OF TERRORIST FINANCING Offence Reference Penalties Committing the offence of financing Sec. 7(1) & 7(3) AT Act, Min 4 years to 20 years of rigorous terrorism (Individual) 2009 (including imprisonment with fine of two times of the amendments ) value of the property involved with the offence or BDT 10 lac, whichever is higher. higher Committing the offence of financing Sec. 7(1) & 7(4) AT Act The entity can be banned by the Government terrorism (Entity) 2009 (including with fine of three times of the amount involved amendments ) with the offence or BDT 50 lac, whichever is greater. Non-Compliance Reference Penalties Failure to comply with the directions Sec. 15(8) of AT Act, Maximum fine of BDT 25 lac and may suspend issued by BB or knowingly provide 2009 (including the registration or license any wrong information amendments ) Failure to take necessary measures, Sec 16(1) & 16 (3)AT Act, Maximum fine BDT 25 lac and suspend the with appropriate caution and 2009 (including Registration or license. responsibility, to prevent and amendments ) identify terrorist financing and to spontaneously report suspicious transaction if any. 1.13 THE LINK BETWEEN MONEY LAUNDERING AND TERRORIST FINANCING The techniques used to launder money are essentially the same as those used to conceal the sources of funds used to support terrorism may originate from legitimate and uses for terrorist financing. But funds sources, criminal activities or both. Nonetheless, disguising the source of terrorist financing, regardless of whether the source is of legitimate or illicit origin, is important. If the source cancan be concealed, it remains available for future terrorist financing activities. Similarly, it is important for terrorists to conceal the use of the funds so that the financing activity goes undetected. money laundering and terrorist financing is that the As noted above, a significant difference between money funds involved may originate from legitimate sources as well as criminal activities. Such legitimate sources may include donations or gifts of cash or other assets of organizations, such as foundations or charities c Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 15 of 120 that, in turn, are utilized to support terrorist activities or terrorist organizations. 1.14 WHY NCC BANK MUST COMBAT ML & TF 1.14.1 Bank Perspective From the viewpoint of banking activities, prevention of money laundering and terrorist financing has three dimensions:  Ethical – taking part in the prevention of money laundering and terrorist financing;  Professional – ensuring that the bank is not involved in recycling the proceeds of crime that would call into question its reputation and integrity;  Legal – complying with laws and regulations that impose a series of specific obligations to banks and their employees. A bank cannot afford to have its reputation tarnished by involvement with money laundering and terrorist financing. Money laundering and terrorist financing erodes confidence on banks, instigates liquidity crisis weaken the reputation and standing of the bank. Therefore, bank and the underlying criminal activities weaken shall prevent money laundering and terrorist financing not only because it is obligated under legislation but also to protect self-interest. 1.14.2 National and Social Perspective Money laundering and nd terrorist financing have potentially devastating economic, security, and social consequences. It provides the fuel for drug dealers, smugglers, terrorists, illegal arms dealers, corrupt enterprises. This drives up the cost of public officials, and others to operate and expand their criminal enterprises. government due to the need for increased law enforcement and health care expenditures (for example, for treatment of drug addicts) to combat the serious consequences resulted from ML & TF. Money laundering diminishes government tax revenue and therefore indirectly harms honest taxpayers. Money laundering distorts assets and commodity prices and leads to misallocation of resources. For financial institutions like banks, it can lead to an unstable liability base and to unsound asset structures, thereby, creating risks of monetary instability and even systemic crisis. The loss of credibility and investor’s confidence, that such crisis can bring, has the potential of destabilizing financial systems, particularly in smaller economies. One of the most serious microeconomic effects of money laundering is felt in the private sector. Money co mingle the proceeds of illicit activity with legitimate launderers often use front companies, which co-mingle funds, to hide the ill-gotten gains. These front companies have access to substantial illicit funds, allowing gotten gains. them to subsidize front company products and services at levels well below market rates. This makes it difficult, if not impossible, for legitimate business to compete against front companies with subsidized funding, a situation that can result in the crowding out of private sector business by criminal organizations. Among its other negative socioeconomic effects, money laundering transfers economic power from the market, government, t, and citizens to criminals. Furthermore, the sheer magnitude of the economic power effect on all elements of society. that accrues to criminals from money laundering has a corrupting effect The social and political costs of laundered money are also serious as laundered money may be used to corrupt national institutions. Bribing of government officials undermines the moral fabric in society, and, corrupts our democratic institutions. When money laundering by weakening collective ethical standards, corrupts goes unchecked, it encourages the underlying criminal activity from which such money is generated. Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 16 of 120 1.15 RESPONSIBILITIES OF THE REPORTING ORGANIZATIONS IN PREVENTION OF MONEY LAUNDERING The reporting organizations shall have the following responsibilities in the prevention of money laundering, (Section25/1-4) namely:- namely:  To maintain complete and correct information with regard to the identity of its customers during the operation of their accounts;  If any account of a customer is closed, to preserve previous records of transactions of such account for at least 5(five) years from the date of such closure;  To provide with the information maintained under clauses (a) and (b) to Bangladesh bank from time to time, me, on its demand;  If any doubtful transaction or attempt of such transaction as defined under clause (n) of section 2 is observed, to report the matter as ‘suspicious transaction report’ to the BFIU, BFIU Bangladesh Bank immediately on its own accord. Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 17 of 120 CHAPTER: 02 INTERNATIONAL AND NATIONAL INITIATIVES ON ML&TF 2.1 INTRODUCTION In response to the growing concern about money laundering and terrorist activities, the initiatives taken by international community has acted on many fronts. Various international organizations, their initiatives instruments that have been developed for AML & CFT purposes relating to AML & CFT, documents and instruments are as follows: 2.2 THE UNITED NATIONS The United Nations (UN) was the first international organization to undertake significant action to fight against money laundering on worldwide basis. The role of the UN is important for several reasons, which are as follows:  The UN actively operates a program program to fight money laundering; the Global Program against Money Laundering, headquartered in Vienna, Austria, is part of the UN Office of Drugs and Crime (UNODC).  The UN has the ability to adopt international treaties or conventions that obligate the ratifying ra countries to reflect those treaties or conventions in their local laws. In certain cases, the UN Security Council has the authority to bind all member countries through a individual country. Security Council Resolution, regardless of other actions on the part of an individual 2.2.1 The Vienna Convention Due to growing concern about the increased international drug trafficking and the tremendous amount of related money entering into financial system, the UN adopted the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Sub stances (1988) known as The Vienna Convention, Substances named after the city in which it was signed. The Vienna Convention deals primarily with provisions to fight the illicit drug trade and related law enforcement issues. At present, nearly 169 countries including Bangladesh are members to the convention. The convention has come into force from November 11, 1990. 2.2.2 The Palermo Convention In order to fight against internationally organized crimes, the UN adopted the International Convention rganized Crime (2000), named after the city in which it was signed as Palermo against Transnational Organized Convention. The Palermo Convention specifically obligates each ratifying country to:  Criminalize money laundering and include all serious crimes as predicate offenses of money aundering, whether committed in or outside of the country, and permit the required criminal laundering, knowledge or intent to be inferred from objective facts;  Establish regulatory regimes to deter and detect all forms of money laundering, including customer identification, ication, record keeping and reporting of suspicious transactions; record-keeping  Authorize the cooperation and exchange of information among administrative, regulatory, law enforcement and other authorities, both domestically and internationally, and consider the ishment of a financial intelligence unit to collect, analyze and disseminate information; establishment  Promote international cooperation. 2.2.3 International Convention for the Suppression of the Financing of Terrorism Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 18 of 120 The financing of terrorism was an international con cern prior to the attacks on the United States on 11 concern September, 2001. In response to this concern, the UN adopted the International Convention for the Suppression of the Financing of Terrorism (1999). The convention came into force on April 10, 2002. The onvention requires ratifying states to criminalize terrorism, terrorist organizations and terrorist acts. convention Under the convention, it is unlawful for any person to provide or collect funds with the (i) intent that the funds be used for, or (ii) knowledge that the funds be used to, carry out any of the acts of terrorism defined in the other specified conventions that are annexed to this convention. 2.2.4 Security Council Resolution 1267 and Successors The UN Security Council requires member States to freeze the assets of the Taliban, Osama Bin Laden and Qaeda and entities owned or controlled by them, as designated by the Sanctions Committee (now Al-Qaeda called the 1267 Committee). The initial Resolution 1267 of October 15, 1999 dealt with the Taliban and was followed by 1333 of December 19, 2000 on Osama Bin Laden and Al Qaeda. Later Resolutions Al-Qaeda. established monitoring arrangements (1363 of July 30, 2001), merged the earlier lists (1390 of January 16, 2002), provided some exclusion (1452 of December 20, 2002) and took measures to improve implementation (1455 of January 17, 2003). The 1267 Committee issues the list of individuals and entities additions or deletions to the list on whose assets are to be frozen and has procedures in place to make additions the basis of representations by member states. The most recent list is available on the website of the 1267 Committee. 2.2.5 Security Council Resolution 1373 ratification, and recognition in local law by the Unlike an international convention, which requires signing, ratification, UN member country to have the effect of law within that country, a Security Council Resolution was passed in response to a threat to international peace and security under Chapter VII of the UN Charter, is g upon all UN member countries. On September 28, 2001, the UN Security Council adopted binding Resolution 1373, which obligates countries to criminalize actions to finance terrorism. It further obligates countries to:  Deny all forms of support for terrorist groups; group  Suppress the provision of safe haven or support for terrorist, including freeing funds or assets of persons, organizations or entities involved in terrorist acts;  Prohibit active or passive assistance to terrorists;  Cooperate with other countries in criminal investigations and share information about planned terrorist acts. 2.2.6 Security Council Resolution 1540 UNSCR 1540 (2004) imposes binding obligations on all states to adopt legislation to prevent the proliferation of nuclear, chemical and biological weapons, and their means of delivery, and establish appropriate domestic controls over related materials to pr event their illicit trafficking. It also encourages prevent enhanced international cooperation on such efforts. The resolution affirms support for the multilateral treaties whose aim is to eliminate or prevent the proliferation of WMDs and the importance for all states s to implement them fully; it reiterates that none of the obligations in resolution 1540 (2004) shall conflict with or alter the rights and obligations of States Parties to the Treaty on the Non-Proliferation Non of Nuclear Convention, or the Biological Weapons Convention or alter the Weapons, the Chemical Weapons Convention, responsibilities of the International Atomic Energy Agency (IAEA) and Organization for the Prohibition of Chemical Weapons (OPCW). 2.2.7 The Counter-Terrorism Terrorism Committee As noted above, on September 28, 2001, the UN Security Council adopted a resolution (Resolution 1373) Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 19 of 120 in direct response to the events of September 11, 2001. That resolution obligated all member countries to upon all member countries, also take specific actions to combat terrorism. The resolution, which is binding upon established the Counter Terrorism Committee (CTC) to monitor the performance of the member countries in building a global capacity against terrorism. Resolution 1373 calls upon all countries to submit a report he steps taken to implement the resolution‘s measures and report regularly on progress. In to the CTC on the self assessment of its existing legislation and this regard, the CTC asked each country to perform a self-assessment mechanism to combat terrorism in relation to the requirements r of Resolution 1373. 2.2.8 Counter-Terrorism Terrorism Implementation Task Force (CTITF) Terrorism Implementation Task Force (CTITF) was established by the Secretary- The Counter-Terrorism Secretary General in 2005 and endorsed by the General Assembly through the United Nations Global Counte Counter-Terrorism Strategy, which was adopted by consensus in 2006. The mandate of the CTITF is to enhance coordination terrorism efforts of the United Nations system. The Task Force consists of 36 and coherence of counter-terrorism international entities, each of which, by virtue of their work, has a stake in multilateral counter counter-terrorism efforts. Each entity makes contributions consistent with its own mandate. While the primary responsibility for the implementation of the Global Strategy rests with Member States, CTITF ensures that the UN system is attuned to the needs of member states, to provide them with the necessary policy support and depth knowledge of the strategy, and wherever necessary, expedite delivery of technical spread in-depth assistance. 2.2.9 Global Program against Money Laundering The UN Global Program against Money Laundering (GPML) is within the UN Office of Drugs and Crime (UNODC). The GPML is a research and assistance project with the goal of increasing the effectiveness of international action against money laundering by offering technical expertise, training and advice to member countries upon request. 2.3 THE FINANCIAL ACTION TASK FORCE The Financial Action Task Force on Money Laundering (FATF), formed by G-7 G 7 countries in 1989, is an intergovernmental body whose purpose is to develop and promote an international response to combat mission to include combating the financing of money laundering. In October, 2001, FATF expanded its mission making body, which brings together legal, financial and law enforcement terrorism. FATF is a policy-making experts to achieve national legislation and regulatory AML and CFT reforms. Currently, it has 37 members including two regional organizations. 2.3.1 FATF Recommendations The latest revision of FATF recommendations by FATF plenary was in February 2012. The previous 40+9 recommendations has been accumulated into 40 (forty) recommendations called the FATF Standards. eration financing has been included in the new standards. FATF is now working on the assessment Proliferation process under the new standards. The following table shows the summary of new standards. Summary of FATF 40 Recommendations: Group Topic Recommendations 1 Policies and Coordination 1-2 2 Money Laundering and Confiscation 3-4 3 Terrorist Financing and Financing of Proliferation 5-8 4 Preventive Measures 9-23 5 Transparency and Beneficial Ownership of Legal Persons and Arrangements 24-25 6 Power & Responsibilities of Competent Authorities and Other Institutional Measures 26-35 7 International Co-operation operation 36-40 Money Laundering & Terrorist Financing Risk Management Guideline of NCC Bank Page 20 of 120 2.3.2 Monitoring Members Progress (Mutual Evaluation) Monitoring the progress of members to comply with the requirements of FATF recommendations is facilitated by a two-stage stage process:  Assessing Technical Compliance with the FATF Recommendations, and  Effectiveness of AML/CFT Systems. In the mutual evaluation stage, each member country is examined and assessed by experts from other member countries in every five years. The first Mutual Evaluation (ME) of Bangladesh was conducted by a joint team of World Bank and International Monetary Fund in October, 2002 and the report thereof was

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