November 9, 2022
Ministry of Planning and Finance issues directive on anti-money laundering and combating the financing of terrorism risks
The Microfinance Supervisory Committee of the Ministry of Planning and Finance has issued Directive No.4/2022 (“Directive”) to implement anti-money laundering and combating the financing of terrorism (“AML/CFT”) risk management systems for microfinance institutions (“MFIs“).
The Directive applies to:
- licensed MFIs and its related persons (member/ individuals/organisations);
- companies, board of directors, senior management members, management members, compliance officers and employees who are part of the MFI;
- banks and financial institutions, companies, non-profit organisations, trust groups and political exposed person that are dealing with MFIs; and
- individuals/companies/organisations, digital money services, FinTech companies, money payment services, insurance companies, securities exchange companies related entities which are cooperating with MFIs.
To comply with the Directive, MFIs must set out policies, risk management and control procedures and methods to implement the government’s AML/CFT risk management process. The Directive sets out the key elements MFIs must know regarding money laundering and the financing of terrorism. They are expected to inspect their financial services products, services and distribution channels thoroughly so as to be completely compliant with the AML/CFT requirements.
The Directive also sets out the required procedure in preparing the AML/CFT risk management control procedures and systems. Requirements to be complied by the MFIs under this Directive includes the following:
- Particulars on sources of risk to monitor – MFIs have to manage AML/CFT risk with steps by step risk-based approach methods which includes, risk identification, risk assessment, risk management, and risk monitoring;
- Particulars on membership policy;
- Use of a risk-based strategy;
The senior management team are required to identify the risk factors below:
- Newly joined members
- Applicants for membership through current members
- Politically exposed persons
- Members who have previously attempted abuse, such as transactions not compliant with AML/CTF requirements
- Members purchasing products on lease
- New members who joined through an intermediary
- Members who carry out electronic money transfers
- Members whose activities are include in risk classes
- Members whose financial transactions are over the reported amount
- Activities related to obtaining grants from local/foreign donors/organisations
- Offshore/onshore loan
- Acceptance of savings from members
- Management on membership and geographic risk;
- Risk management on goods/services distribution channels;
- Particulars of high-risk identified countries;
- Risk management relating to the financing of terrorism;
- Inspection of sanctions; and
- Providing knowledge and training to employees.
Moreover, the responsibilities of the management team, compliance officer and monitoring guidelines for risk management control are set out in the Directive to ensure that MFIs are in compliance with the AML/CFT policy and procedure.
Failure to comply with this Directive, action will be taken, including against MFIs, its members and those who took part in the breach, according to the provisions of the Microfinance Law, Anti-Money Laundering Law as well as the Anti-Terrorism Law.
We will continue to monitor further developments regarding MFIs’ AML/CFT and provide updates accordingly.
If you have any questions or require any additional information, please contact Thuzar Tin or the ZICO Law contact you usually deal with.
This alert is for general information only and is not a substitute for legal advice