1

CHAPTER-01

INTRODUCTION OF THE REPORT

This study is conducted to reveal the “Money Laundering & Terrorist Financing and BDBL

Policy to Prevent It”. This study is conducted to find how the money laundering and terrorist

financing is emerging and how it is controlled by Bangladesh Development Bank Limited under

the supervision of Bangladesh Bank.

Money laundering and terrorist financing and their measures to combat it have become the focus

of an intense international effort. The effects of money laundering on economic devolopment are

difficult to quantify, however, it is clear that such activity damages the financial institutions,

reduces productivity in the economy’s external sector. For developing countries to combat

money laundering become more difficult than developed countries because of their inadequate

regulatory environment and vulnerable financial system.

An efficient and stable banking system is the prerequisite for overall development of the

country.To maintain stability and integrity of international financial system, Financial Action

Task Force (FATF), an inter-government body established by G-7 in 1989, has set 40

recommendations for preventing money laundering and terrorist financing.

In domestic level, Bangladesh Bank, as the major regulator of the financial system of the country

plays a pivotal role to stabilize and enhance the efficiency of the financial system. Considering

money laundering (ML) and terrorist financing (TF) as one of the major threats to the stability

and the integrity of the financial system, Bangladesh Bank has taken several initiatives including

issuance of circulars/circular letters/guidance notes under money laundering prevention Act and

Anti-terrorism Act. The regulator issued a comprehensive ‘Guidance Notes On Prevention Of

Money Laundering’ in 2003 based on Money Laundering Prevention Act,2002 which

enumerated the duties and responsibilities of commercial banks of the country to prevent money

laundering.

The purpose of this study is to outline the money laundering and terrorist financing routes and

forms and Bangladesh Development Bank Ltd. (BDBL) policy to prevent it through the guidance

2

1.1 Title Of The Study

1.2 Background Of The Study

and assist of Bangladesh Bank. The other purpose of the study is to identify and describe the

overall banking of Bangladesh Development Bank Ltd. and its activities.

In addition to gaining great experience to complete classroom learning, by an internships a

student can beef up his knowledge and portfolio. Further business graduates need to have both

theoretical and practical knowledge to manage the business activity properly. In order to be

familiar with organizational culture and gain some practical knowledge about an organization,

School of Business, Ahsanullah University Of Science and Technology provides a 2 months

internship program as a part of the BBA program. After completion of the program period a

student must submit the study on the assigned topic to the Supervisor.

After the completion of four-year academic BBA program, I was placed in Bangladesh

Development Bank Limited Bank (BDBL), Head office, Rajuk Avenue, Dhaka for the internship

program by Bangladesh Development Bank Training Institute on basis of the forwarding letter

by the School Of Business, University of Ahsanullah University Of Science and Technology.

The duration of my organizational attachment was, by policy 60 working days, starting from

April 26, 2016 to June 21, 2016.As a requirement for the completion of the program I needed to

submit this study, which is to outline the the money laundering and terrorist financing routes and

forms and Bangladesh Development Bank Limited Bank (BDBL), policy to prevent it through

the guidance and assist of Bangladesh Bank. The other purpose of the study is to identify and

describe the overall banking of Bangladesh Development Bank Ltd. and its activities and new on

the job learning experiences.

I was assigned in Bangladesh Development Bank Ltd (BDBL) through School of Business. I

think BDBL is development financing institution continued its effort to make an effective

contribution towards expansion of industrialization process of Bangladesh. BDBL has already

started the commercial banking and the bank is now drowned with foreign exchange

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1.3 Origin Of The study

1.4 Rationale Of Selecting BDBL

business .Because of commercial banking and foreign exchange, there is a huge chance for

money laundering. it seems to me that in BDBL there is a sufficient opportunity to gain practical

knowledge about money laundering as well as its overall performance, shortfall of capital, loan

agreement of the bank. The working environment is good and the employees are very much

cooperative to provide practical knowledge. Here I worked in Anti Money Laundering and

Terrorist Financing department. After completion of my 2 months Internship period in consulting

with the supervisor of the program I have selected a topic “Money Laundering and Terrorist

Financing routes and forms and BDBL policy to prevent it”.

Main Objective:

The objective of the study is to comprehensive study on Bangladesh Development Bank

Limited to find out Money Laundering and Terrorist Financing routes and forms and

BDBL policy to prevent it.

Specific Objectives:

To Present an overview of Bangladesh Development Bank Ltd (BDBL).

To understand various department activities and their key responsibilities.

To Become familiar with organizational culture.

Describe BDBL policy and ways to identify the money laundering and terrorist financing.

To determine the limitations of Bangladesh Development Bank Ltd (BDBL).

To find out problems and suggesting recommendations for further improvement.

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1.5 Objective Of The Study

The scope of the study was on the organization of Bangladesh Development Bank Ltd

(BDBL).The study was enclosed only on the Head Office and gave more concentration on

money laundering, branch management department which works on money laundering and

terrorist financing prevention policy.

Correct and smooth completion of report requires adherence to some rules and methodology. In

order to make the report, the decision has been taken to collect various primary and secondary

data. Data have been collected by oral interviewing the responsible officers. They also gave me

annual report, annual budget granted through government of BDBL and other documents.

Different forms of statistical configurations such as table percentage rates and ratios have been

used to make the study meaningful and realistic.

After completing the institutional experience, practical performances in the formal stage become difficult. So in performing this report my lack of proper knowledge greatly influenced in this performance. Besides this, every study has some limitations. Those are as follows:

Lack of sufficient knowledge. Lack of available information and documents to support our study.Up-to-date information was not available.Prolonged process and long time involved in the evaluation of project.Improper combination among various departments.Confidentiality of the bureaucrats.Unwillingness to give information.Most of the manual of BDBL is maintained in bangle.Only few days’ internship’s experience is not enough time to find out all the pros and cons of such a vast project.

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1.6 Scope Of The Study

1.7 Methodology Of The Study

1.8 Limitations Of The Study

6

Chapter 02

Knowing

“Bangladesh development bank limited”

With the decision of the Government, Bangladesh Development Bank Ltd. (BDBL) was

incorporated on 16 November, 2009 as a Public Company Limited by amalgamation of former

Bangladesh Shilpa Bank (BSB) and Bangladesh Shilpa Rin Sangstha (BSRS) which established

1972 provide loans and increase investment in Bangladesh.

Two Vendors’ Agreements were signed between the Government of the People’s Republic of

Bangladesh and the BDBL on 31 December, 2009 to acquire and take-over all of their (BSB &

BSRS) assets, benefits, rights, powers, authorities, privileges, liabilities, borrowings and

obligations and to carry on with the same business.

The defunct BSB had 15 branches while BSRS has two. BSB and BSRS have financed 174 and

69 projects. The paid up capital of the merged company will amount to 400 crore. Before merged

the paid up capital of BSB was TK 200 crore was TK 70 crore for BSRS.

As a public limited company, BDBL formally embarked its journey on January 03, 2010. It

extends financial assistance for setting up industries and provides all kinds of commercial

banking services to its customers through its branch network in Bangladesh. The BDBL also

inherited membership of Dhaka Stock Exchange Limited (DSE) and

Citation Stock Exchange Limited (CSE). In order to contribute to the capital market, it acts as

stock dealer and operates two brokerage houses, one at Motijheel and the other at

With the decision of the Government, Bangladesh Development Bank Ltd. (BDBL) was

incorporated on 16 November, 2009 as a Limited Company under the Companies Act. 1994 by

merger of former Bangladesh Shiplap Bank (BSB) and Bangladesh Shiplap Ran Sanest (BSRS)

are two Development Financial Institutions (Dais) in the public sector.

Karwan Bazar which are providing services to investors- n small and medium. The BDBL is also

managing a close-end mutual fund with the paid up capital of TK 5.00 crore.

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2.1 About The BDBL

Table 2.1: An overview of Bangladesh Development Bank BDBL

Name Bangladesh Development Bank Limited (BDBL) Established through merger of former BSB and BSRS

1) Registered Office BDBL Bhaban, 8, Rajuk Avenue, Dhaka-10002) Legal Status Public limited Company 3) Date of Incorporation November 16, 20094) Extent of Shareholding 100% Share owned by the Government Of

Bangladesh5) Authorized Capital Tk. 1000.00 crore6) Paid-Up Capital Tk. 400.00 crore7) Face Value Per Share Tk. 100.00 8) Accounting Period January-December9) Date of Business Commencement

CertificateNovember 16,2009

10) Banking License Issued by Bangladesh Bank

November 19,2009

11) Date of Vendors Agreements Signed December 31,2009 between the Government of the people’s Republic of Bangladesh and Bangladesh Development Bank Ltd

12) Line of Business All Banking Business including Capital Market Operation

13) Domestic NetworkNumber of Divisions in Head Office 11

Number of Departments in Head Office 27 Number of Zone Office 4 Number of Branch Offices 32 Number of Urban Branch 25 Number of Rural Branch 7 Number of AD Branch 5 Number of Human Resource 878

14) Membership of Stock Exchange Dhaka Stock Exchange15) Subsidiary Companies BDBL Securities Ltd. 12, Karwan Bazar, Dhaka

BDBL Investment Service Ltd. 8, Rajuk Avenue,Dhaka.

16) Corporate Tax Rate 42.50%17) Auditors Howladar Yunus and Co. and MABS and J partners18) Legal Adviser & Consultant19) Income Tax Adviser K.M. Hasan and CO. Chartered Accountants20) Credit Rating Agency Credit Rating Information and Services Limited

(CRISL)21) Swift Code BIC: BDDBBDDH22) Website www.bdbl.com.bd

(Source: Annual Report 2014)

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2.2 Company Overview

There are 37 branch around the country and the bank has a branch of employees in various department in various sector according to the annual study of 2014 there are 878 employees working here.It goes without saying that the most important resource of any institution, more so for a bank, is its human resource. As on December 31,2014 the total human resource was 878.Among these, officers working in different disciplines including staff position were mentioned below:

Table 2.2: Number of employees of Bangladesh Development Bank BDBL

SL. No. Discipline Numbers

1 Accountants 012 Lawyers 143 Economists 494 Engineers 435 MBA/Financial Analysts 1476 Statisticians 197 Senior Officers (IT) 208 Others 3919 Staff 194Total 878 (Source: Annual Report 2014)

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2.3 Number Of Employees

To emerge as the country’s prime Financial Institution for supporting private sector industrial and other projects of great significance to the country’s economic development. Also be active participant in commercial banking by introducing new lines of product and providing excellent services to the customers.

To be competitive with other Banks and Financial Intuitions in rendering services;

To expand branch network in commercially and geographically important places;To employ quality human resources and enhance their capability throughmotivation and right type of training at home and abroad;To delegate maximum authority ensuring proper accountability;To maintain continuous improvement and up gradation in business policies and procedures;

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2.4 Company Logo

2.5 Vision

2.6 Mission

To adapt to new technology;To maximize profit by strong, efficient and prudent financial performance; andTo introduce new product lines according to market needs.

The Bank is always committed to serve the clients with the best values and innovative products and services to enrich its portfolio looking at the client’s demands and desires.

1. Development Banking•Industrial Loan with emphasis on syndicated arrangement (Power & Energy, Telecommunication, Fiber Optic Cable, etc.)•Public-Private Partnership (PPP) project (Port Development, Transport & Communication like Road, Water & Air Ways etc.)•Small & Medium Enterprise (SME like IT industries i.e. development of Hardware & Software).•Agro -based ventures depending on indigenous raw materials (like Jute Twin/Yarn and other Industries).•Green Banking (Environment & Eco-Friendly industries like automatic brick kiln, renewable energy, effluent treatment plant, etc.)•Lease Financing.•Real Estate business (including housing loan).

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2.7 Products Of The Bank

2.Commercial & Foreign Exchange Business

A. Deposit Banking:• Current Deposit• Savings Deposit # Short Term Deposit• Fixed Deposit ^Deposit Pensions Scheme• Other Special savings deposit:* 5-Year Term BDBL Sanchay Scheme (BDBLSS)*10-Year Term Sheikh Sanchez Scheme (SSS)*10-Year Term Chickasha Sanchez Scheme (CSS)

B. Short Terms Loans:• Cash Credit (Hypothecation)• Cash Credit (Pledge)• Secured Advances (General)• Secured Advances (Financial Obligation)• Retail Banking* Consumer’s Credit* Personal Loan

C. Trade/Foreign Trade Financing(1) Export Cash Credit(2) Packing Credit(3) Purchase of Local & Foreign Documentary Bills(4) Payment Against Documents (PAD)(5) Loan Against Imported Merchandise (LIM)(6) Loan Against Trust Receipt (LTR)

Foreign Exchange:• Local L/C• Import L/C• Export/C• Back to Back L/C

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• Foreign Remittance• Foreign Exchange Buy & Sale

D. Other Banking Service:•Demand Draft Issue•Payment order issue• Selling of Prize Bond• Selling of savings certificates, etc.

Fig 2.1: Corporate structure of BDBL

(Source : Annual report of 2014)

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2.8 Corporate Structure

BDBL provides long and medium-term loans both in local and foreign currencies, guarantees repayment of loans raised by investors from other sources, and provides equity support by way of outright purchase of shares and by underwriting the public issue of shares. Besides, the bank also performs the following activities:

Fig 2.2: Activities of Bangladesh Development bank limited

Activities Of BDBL

Operational Others

Profit & LossDeposit MobilizationLoan Application ReceiveTerm Loan SanctionDisbursement Of Term LoanWorking Capital SanctionOther InvestingProject ImplementationLoan PortfolioLoan RecoveryLegal Option and Written Off

AdvisoryTrainingComputerizationHuman ResourcesBoard NewsAnnual General MeetingObservance Of National Days

( Source: BDBL internal information)

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2.9 General Banking Activities

Financial and strategic SWOT analysis provides a comprehensive insight into the company’s history, corporate strategy, business and financial structure, management and operations. The study contains a detailed SWOT analysis.BDBL undertake time to time SWOT (Strength, Weakness, Opportunity, Threats) analysis for reviewing bank’s market position.

Fig 2.3: SWOT Analysis of BDBL

( Source: BDBL Internal Information)

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Strategic Analysis

Internal External

Strength Build & Enhance

Weakness Resolve & Reduce

Opportunities

Exploit&Expand

Threats

Avoid&Thwart

2.10 SWOT Analysis Of BDBL

A . Strength

Strength is an internal part of a firm and they should be enhanced and build it more its further development. In this sector BDBL has its own strategy to build and enhance its strength.

There are as follows:

Table 2.3: Strength Of BDBL

Strength 1 BDBL has skilled financial management, good credit control and few bad debts.

Strength 2 One of the fundamental objectives of BDBL is to boost up small and medium scale industries ,which makes a special perception about the bank.

Strength 3 BDBL is unique in its nature having both specialized and commercial operation it is regarded as a development bank as well as commercial one.

Strength 4 Online banking operation and branch banking facility.

Strength 5 A strong balance sheet. Access to extensive credit, a strong credit rating, and a good relationship with the bank and the other source of finance.

Strength 6 Effective research and development, use of design and innovation.

Strength 7 Skilled employees, successful recruitment, and effective training and development.

Strength 8 Govt. support and Encouragement.

Strength 9 BDBL follows leading finance

B . Weakness

In this sector BDBL has its own strategy to should resolve and reduce the weakness.These are as follows :

Table 2.4: Weakness Of BDBL

Weakness-1 Shortage of branches.

Weakness-2 Lack of competitive banking.

Weakness-3 Lack of promotional activities.

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Weakness-4 Decision making process is lengthy.

Weakness-5 Less diversified product and service line. The salary of BDBL is not high enough related with other commercial bank operating in Bangladesh.

Weakness-6 MAN/Internet/ On-line services in BDBL is not upgraded

C . Opportunities

In this sector BDBL has its own strategy to exploit and expand its opportunities. These are as follows:

Table 2.5: Opportunities Of BDBL

Opportunity-1 There are huge demand of micro-credit, small and medium scale finance.

Opportunity-2 There are opportunities of innovation in the banking industry.

Opportunity-3 Bangladesh economy is expanding rapidly, so the need of bank is growing up.

D . Threats

In this sector BDBL has its own strategy to avoid and thwart its threat. These are as follows:

Table 2.6: Threats Of BDBL

Threat-1 More and less all the competition in the banking industry are competent, so to survive BDBL has to face the competition.

Threat-2 Too much interrupted by international assistance institutions like World Bank, IMF, WTO.

Threat-3 Due to the gov’t institution many of the banking decision basic by political government.

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Table 2.7: Five year performance at a glance

Sl. No.

Particulars 2014 2013 (Restated)

2012 2011 2010

A. Balance Sheet Matrix

1. Authorized Capital 1000.00 1000.00 1000.00 1000.00 1000.00

2. Paid up Capital 400.00 400.00 400.00 400.00 400.00

3. Reserve Fund & Other Reserve 1320.55 1247.03 1165.70 1082.33 1160.06

4. Retained Earnings 33.23 18.77 4.19 4.05 3.67

5. Total Equity 1753.78 1647.03 1569.88 1486.38 1563.73

6. Capital Required (As per Basel

II)

531.02 481.56 407.21 400.00 400.00

7. Capital Maintained (As per

Basel II)

1305.37 1193.43 1109.72 1030.35 1063.25

8. Capital Surplus (As per Basel II) 774.35 711.87 702.51 630.35 663.25

9. Capital Adequacy Ratio (Basel

II)

24.58% 24.78% 27.26% 28.90% 28.08%

10. Deposits (including Bills

Payable)

2335.01 1998.88 794.55 470.68 325.40

11. Investments 1167.03 771.83 323.03 282.09 158.84

12. Loans & Advances 1650.10 1545.72 1474.31 1004.61 990.60

13. Fixed Assets 845.67 858.34 871.35 882.47 896.15

14. Advances to Deposit Ratio

(ADR)

64% 86% 155.12 % 148.48 % 168.92 %

16. Total Assets 5025.99 4685.78 3271.05 2884.77 2751.88

B. Capital Matrix

17. Total Risk Weighted Assets

(Basel II)

5310.20 4815.58 4069.37 3564.71 3786.00

18. Core Capital (Tier- I) 942.43 825.06 733.05 656.85 603.25

19. Supplementary Capital (Tier- II) 362.93 368.37 376.40 373.30 460.00

20. Total Eligible Capital (Tier I, II

& III)

1305.37 1193.43 1109.45 1030.15 1063.25

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2.11 Last Five Years Performance Of BDBL

21. Paid up Capital & Statutory

Reserve

594.77 565.79 542.36 521.80 504.58

C. Asset Quality

22. Classified Loans & Advances (excluding Staff Loan)

524.14 520.27 541.79 310.70 310.17

23. % of Classified Loans & Advances (excluding Staff Loan)

38.32 40% 42.99% 38.28% 31.31%

24. Required Provision against Classified Loans & Advances

236.46 298.38 215.90 119.87 140.52

25. Provision Maintained 237.58 331.95 217.38 176.83 168.61

26. Surplus of Loan Provision 1.12 33.57 1.48 56.96 28.09

27. Amount of Written of Loan 1964.44 1861.88 1946.78 2126.45 2387.23

D. Income & Expenditure Statement Matrix

28. Interest Income 239.53 197.73 150.84 120.68 79.98

29. Interest Paid on Deposit & Borrowings

209.37 102.83 62.86 31.10 11.52

30. Net Interest income 30.15 94.91 87.98 89.58 68.46

31. Income from Investment & Capital Market Operation

207.41 192.28 47.23 36.17 86.21

32. Dividend Paid for 1st BSRS Mutual Fund

110% 100% 125% 70%

33. Non-Funded Income 30.56 39.90 53.96 34.17 20.00

34. Total Operating Income 268.12 327.09 189.17 159.92 172.25

35. Administrative & OperatingExpenditure

118.22 115.29 86.37 73.81 89.77

36. Net Profit before Tax 144.90 117.13 102.80 86.11 82.24

37. Provision for Income Tax 31.98 28.83 19.10 17.51 17.79

38. Net Profit after tax 112.92 88.30 83.70 68.60 64.45

E. Foreign Exchange Business

39. Import L / C (Sight) 90.96 85.57 113.84 - -

40. Import L / C (Deferred) 20.47 28.21 144.80 - -

41. Export 27.28 16.41 8.40 - -

F. Shareholders’ Information

42. Dividend Paid to the Govt. 10.00 10.00 7.50 5.00 5.00

43. Net Assets Value Per Share (Taka)

438.44 411.76 392.47 371.59 390.93

44. Earning Per Share (Taka) 28.23 22.07 20.92 17.15 16.11

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G. Financial Indicators (%)

45. Net Interest Margin 5% 5.53% 6.15% 6.49% 5.58%

46. Net Operating Income to Assets 2.98% 4.53% 3.14% 2.98% 3.00%

47. Cost of Fund 10.36% 9.84% 10.12% 8.04% 8.91%

48. Cost to Income Ratio 68.61% 50.70% 59.21% 54.92% 55.12%

49. Return On Assets (ROA) 2.25% 1.88% 2.56% 2.38% 2.34%

50. Return On Investment (ROI) 17.77% 24.91% 14.62% 12.82% 52.75%

51. Return On Equity (ROE) 6.44% 6.19% 5.33% 4.61% 4.12%

H. Other Information

52. Number of Shareholders 100% Govt.

owned

-do- -do- -do- -do-

53. Number of Zone Offices 4 4 4 4 4

54. Number of Branch Offices 32 28 24 21 17

55. Number of Employees (Regular) 878 826 857 836 757

(Source : Annual report of 2014)

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21

Chapter : 3

Money laundering &Terrorist financing

On recent days money laundering has become a sweltering issue in financial arena

internationally. Money laundering is a very sophisticated and dynamic crime.

3.1.1 Definition Of Money Laundering

According to Money Laundering prevention Act-2009, Money Laundering means-

(i) Transfer, conversion, remitting abroad or remitting or bringing from abroad to Bangladesh

proceeds or property acquired through commencement of a particular offence for the purpose

of disguising the illicit origin of the proceed or property or transferring abroad of proceeds or

property acquired through legal or illegal means;

(ii) Conduct or attempt to conduct a financial transaction in a manner that will not be required to

report under the ACT;

(iii) Do such activities so that the illegitimate source of such proceed or property cab be

disguised or attempt to do such activity or knowingly assist or conspire to perform such

activities.

The U.S. Customs service, an arm of the Department of Treasury, provides a lengthy

definition of money laundering as “the process whereby proceeds, reasonably believed to

have been derived from criminal activity, are transported, transferred, transformed, converted

or intermingled with legitimate funds for the purpose of concealing or disguising the true

nature, source disposition, movement or ownership of these proceeds. The goal of the money

laundering process is to make funds derived from, or associated with, illicit activity appear

legitimate.”

3.1.2 International Definition Of Money Laundering

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3.1 Money Laundering

Another definition of money laundering under U.S law is “… the involvement in any one

transaction or series of transaction that assists a criminal in keeping, concealing or

disposing of proceeds derived from illegal activities.

The European union defines it as “ the conversion or transfer of property, knowing that

property is derived from serious crime, for the purpose of concealing or disguising the illicit

origin of the property or of assisting any person who is involved in committing such an

offence or offences to evade the legal consequences of his action, the concealment or disguise

of the true nature, source, location, disposition, movement, rights with respect to, or

ownership of property, knowing that such property is derived from serious crime”

The joint Money Laundering Sterling Group (JMLSG) of the U.K defines it as “the

process whereby criminals attempts to hide and disguise the true origin and ownership of

the proceeds of their criminal activities, thereby avoiding prosecutions, conviction and

confiscation of their criminal funds”

In lay terms money laundering is most often describe as” turning of dirty or black money

into.

clean or white money”. If undertaken successfully, money laundering allows criminals to

legitimize “dirty” money by mingling it with “clean” money, ultimately providing a legitimate

cover for the source of their income. Generally, the act of conversion and concealment is

considered crucial to the laundering process.

3.2 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 in the

knowledge that they are to be used, in full or in part, in order to carry out:

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a. An act which constitutes an offence within the scope of and as defined in one of the treaties

listed in the link given below 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

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) of Anti Terrorism Act, 2009 in line with the requirement set

out in 9 (nine) conventions and protocols that were annexed in the convention. Section 7(1) of

Anti Terrorism Act (ATA), 2009, defines terrorist financing as 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.

Moreover, according to Anti Terrorism Act (ATA), 2009 conviction for terrorist financing shall

not depend on any requirement that the fund, service or any other property was actually used to

carry out or direct or attempt to carry out a terrorist act or be linked to a specific terrorist act. The

penalties for the offences for money laundering are-

(1) In case of a TF offence made by a person, he/she shall be punished with rigorous

imprisonment for a term not exceeding 20 (twenty) years but not less than 4 (four) years, and in

addition to that, a fine equivalent to twice the value of the property involved with the offence or

taka 10(ten) lac, whichever is greater, may be imposed.

(2) In case of a TF offence made by an entity, the Government may listed the entity in the

Schedule or proscribe and listed the entity in the Schedule, by notification in the official Gazette

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and in addition to that, a fine equivalent to thrice the value of the property involved with the

offence or of taka 50 (fifty) lac, whichever is greater, may be imposed. Moreover, the head of

that entity, whether he is designated as Chairman, Managing Director, Chief Executive or by

whatever name called, shall be punished with rigorous imprisonment for a term not exceeding 20

(twenty) years but not less than 4 (four) years and, in addition to that, a fine equivalent to twice

the value of the property involved with the offence or of taka 20 (twenty) lac, whichever is

greater, may be imposed unless he/she is able to prove that the said offence was committed

without his knowledge or he had tried his best to prevent the commission of the said offence.

Property means-

(i) Any kind of assets, whether tangible, movable or immovable; or

(ii) Cash, legal documents or instruments in any form, including electronic or digital,

evidencing title to, or interest in such assets.

“Predicate offence” means the offences from which the proceeds derived from committing or

attempt to commit the following offences:

(1) Corruption and bribery

(2) Counterfeiting currency

(3) Counterfeiting documents

(4) Extortion

(5) Fraud

(6) Forgery

(7) Illicit arm trade

(8) Illicit narcotic drugs and psychotropic substance trade

(9) Trade of stolen goods

(10) Kidnapping, illegal restraint, hostage-taking

(11) Murder, grievous bodily injury

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3.3 Property Of Money Laundering

3.4 Predicate Offences Of Money Laundering

(12) Woman and child trafficking

(13) Smuggling and trafficking of local and foreign currency

(14) Theft or robbery or piracy or sea piracy or air piracy

(15) Human trafficking

(16) Dowry;

(17) Illegal trafficking of customs related crime

(18) Tax related crime

(19) Piracy of intellectual property

(20) Terrorism and terrorist financing

(21) Environmental crime

(22) Sexual exploitation

(23) Insider trade and market manipulation

(24) Organized crime

(25) Obtaining money by threatening

(26) Any other offence which Bangladesh bank declares as predicate offence with Govt.

approval.

3.5 Reasons Behind Money Laundering

Criminals mainly engage in money laundering for three reasons:

(1) To show Legitimacy of Funds

(2) Hide Sources of illicit proceeds

(3) Shield against investigation and capture

1.To Show Legitimacy Of Funds

organization that engages in criminal conduct for financial gain because;

It covers operating expenses

Replenishes inventories

Purchase the service of corrupt officials to escape detection

Promotes the interests of illegal enterprise and

Pays for extravagant life style

26

To spend money in this ways, criminals must make the money they derived illegally

appear

legitimate.

2. Hide Sources Of Illicit Proceeds

Criminals mainly hide the source of their money to ensure that illicit proceeds are not used to

prosecute them.

3. Shield Against Investigation And Capture

The proceeds from crime often become the target of investigation and seizure. To shield unfair

gains from suspicion and protect them from seizure, criminal must make them look legitimate.

3.6 Stages Of Money Laundering:

There is no single method of laundering money. In most of the criminal cases, the initial

proceeds usually take the form of cash. For example, bribery, extortion and street level trade of

drugs are almost always made with cash. This cash need to enter into financial system by some

means so that it can be converted into a form which can be more easily transformed, concealed

or transported.

Despite of variety of methods employed, the laundering is not a single act but a process

accomplished in 3 basic stages-

1. Placement

2. layering and

3. Integration.

Placement

The physical disposal of the initial proceeds derived from illegal activity. This means the

movement of cash from its source. On occasion the source can be easily disguised. This is

followed by placing it into circulation through financial institutions, shops, exchange house,

security brokers and other business, both local and abroad.

Layering

Separating illicit proceeds from their source by creating complex layers of financial transactions

designed to disguise the audit trial and provide anonymity. The purpose of this stage is to make it

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more difficult to detect and uncover a laundering activity.

Integration

The provision of apparent legitimacy to wealth derived criminally. If the layering process has

succeeded, integration schemes place the laundered proceeds back into the economy in such a

waythat they re-enter into the financial system appearing as normal business funds.

These three steps may occur as separate distinct phase. They may also occur simultaneously or

more commonly, may overlap. How the basic steps are used depends on the available laundering

mechanisms and the requirements of the criminal organizations.

These three steps can be illustrated in to the following figure

Figure:

Fig 3.1: The Steps Of Money Laundering

The table below provides some typical example of the stages of money laundering-

28

Table 3.1 : Examples Of Money Laundering

3.7 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 and uses for terrorist financing. But funds used to support terrorism may originate

from legitimate 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 can 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.

As noted above, a significant difference between money laundering and terrorist financing is that

the 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 that, in turn, are utilized to support terrorist activities or terrorist

organizations.

3.8 Reasons Of Combating Money Laundering:

There are plenty of factors for what we have to combat money laundering. They are-

29

1. Money laundering has a devastating economic, security and social consequences. Its

provide fuel for drug dealers, smugglers, terrorists, illegal arms dealers, corrupt public

officials and others to operate and expand their criminal networks.

2. These increases governments cost for law enforcement and health care expenditure

3. Money laundering reduces government’s tax revenue. It also makes government’s tax

collection difficult and as a result tax rate goes up.

4. Money laundering misleads asset and commodity prices and leads to a misallocation of

resources.

5. Money laundering can leads to an unsound asset structure and thus create risk of

monetary instability for banks.

6. One of the most serious micro economic effects of money laundering is felt in the private

sector. Money laundering often uses front companies, for co-mingling their illicit

proceeds with legitimate funds, to hide the ill-gotten gains. Because of substantial illicit

funds, these front companies can subsidize their products and services at levels well

below market rates. This makes it difficult for legitimate business to compete against

front companies. This situation can result in the crowding out of legitimate private sector

business by criminal organizations.

7. Another negative socioeconomic effect of money laundering is, it transfers from the

market, governments and citizens to criminals.

8. The social and political cost of laundered money is also serious as laundered money may

be used to corrupt national institutions.

9. Money laundering damages the moral fabric of society and weakens collective ethical

standards.

10. Money laundering weakens reputation of financial institution and at the same time

reputation of the country.

3.9 Vulnerability Of The Financial System To Money Laundering

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Money laundering is often thought to be associated solely with banks and

moneychangers. All financial institutions, both banks and non-banks, are susceptible to

money laundering activities. Whilst the traditional banking processes of deposit taking,

money transfer systems and lending do offer a vital laundering mechanism, particularly

in the initial conversion from cash, it should be recognised that products and services

offered by other types of financial and non-financial sector businesses are also attractive

to the launderer. The sophisticated launderer often involves many other unwitting

accomplices such as currency exchange houses, stock brokerage houses, gold dealers,

real estate dealers, insurance companies, trading companies and others selling high value

commodities and luxury goods.

Certain points of vulnerability have been identified in the laundering process, which the

money launderer finds difficult to avoid, and where his activities are therefore more

susceptible to being recognized. These are:

entry of cash into the financial system;

cross-border flows of cash; and

Transfers within and from the financial system.

Financial institutions should consider the money laundering risks posed by the products

and services they offer, particularly where there is no face-to-face contact with the

customer, and devise their procedures with due regard to that risk.

Although it may not appear obvious that the products might be used for money

laundering purposes, vigilance is necessary throughout the financial system to ensure that

weaknesses cannot be exploited.

Banks and other Financial Institutions conducting relevant financial business in liquid

products are clearly most vulnerable to use by money launderers, particularly where they

are of high value. The liquidity of some products may attract money launderers since it

allows them quickly and easily to move their money from one product to another, mixing

lawful and illicit proceeds and integrating them into the legitimate economy.

31

All banks and non-banking financial institutions, as providers of a wide range of money

transmission and lending services, are vulnerable to being used in the layering and

integration stages of money laundering as well as the placement stage

.

Electronic funds transfer systems increase the vulnerability by enabling the cash deposits

be switched rapidly between accounts in different names and different jurisdictions.

However, in addition, banks and non-banking financial institutions, as providers of a

wide range of services, are vulnerable to being used in the layering and integration stages.

Other loan accounts may be used as part of this process to create complex layers of

transactions.

Some banks and non-banking financial institutions may additionally be susceptible to the

attention of the more sophisticated criminal organizations and their “professional money

launderers”. Such organizations, possibly under the disguise of front companies and

nominees, may create large scale but false international trading activities in order to move

their illicit monies from one country to another. They may create the illusion of

international trade using false/inflated invoices to generate apparently legitimate

international wire transfers, and may use falsified/bogus letters of credit to confuse the

trail further. Many of the front companies may even approach their bankers for credit to

fund the business activity. Banks and nonbanking financial institutions offering

international trade services should be on their guard for laundering by these means.

Investment and merchant banking businesses are less likely than banks and money

changers to be at risk during the initial placement stage.

Investment and merchant banking businesses are more likely to find them being used at

the layering and integration stages of money laundering. The liquidity of many

investment products particularly attracts sophisticated money laundering since it allows

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them.

Although it may not appear obvious that insurance and retail investment products might

be used for money laundering purposes, vigilance is necessary throughout the financial

system to ensure that non traditional banking products and services are not exploited.

Intermediaries and product providers who deal direct with the public may be used at the

initial placement stage of money laundering, particularly if they receive cash. Premiums

on insurance policies may be paid in cash, with the policy subsequently being cancelled

in order to obtain a return of premium (e.g. by cheque), or an insured event may occur

resulting in a claim being paid out. Retail investment products are, however, more likely

to be used at the layering and integration stages. The liquidity of a mutual funds may

attract money launderers since it allows them quickly and easily to move their money

from one product to another, mixing lawful and illicit proceeds and integrating them into

the legitimate economy.

Lump sum investments in liquid products are clearly most vulnerable to use by money

launderers, particularly where they are of high value. Payment in cash should merit

further investigation, particularly where it cannot be supported by evidence of a cash-

based business as the source of funds.

Insurance and investment product providers and intermediaries should therefore keep

transaction records that are comprehensive enough to establish an audit trail. Such

records can also provide useful information on the people and organizations involved in

laundering schemes.

Corporate vehicles trust structures and nominees are firm favorites with money

launderers as a method of layering their proceeds. Providers of these services can find

themselves much in demand from criminals.

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3.11 Requirements For Banks Under Money Laundering

The facility with which currency exchanges can be effected through a bureau is of

particular attraction especially when such changes are effected in favor of a cheque or

gold bullion.

3.10 Legal Framework and Guideline Against Money Laundering

Money laundering prevention Ordinance,2012

Money laundering prevention Act, 2012.

Under the money laundering prevention act, 2009, al the bank has to fulfil some requirement to

comply with the policy and facilitate Bangladesh Bank’s initiatives to prevent money laundering.

All the banks consider these four requirement as their main responsibility against preventing

money laundering-

KYC Requirement: are require to retain correct and full information of customer and

their accounts that will be used to identify customers.

Record Keeping: The Act also requires the banks to retain transection records at least for

5 years after termination of relationships with their customers.

Provide Information: According to the Act all the Banks have to provide customer

identification and transection records to Bangladesh Banks on demand.

STR Reporting: All the Banks have to report to Bangladesh Bank where that suspect

that a money laundering offence has been or being committed.

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3.12 Why We Must Combat ML & TF

Money laundering has potentially devastating economic, security, and social consequences.

Money laundering is a vital process to make crime worthwhile. It provides the fuel for drug

dealers, smugglers, terrorists, illegal arms dealers, corrupted public officials, and others to

operate and expand their criminal enterprises. This drives up the cost of 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. It also makes government tax collection activities more difficult. This loss of revenue

generally means higher tax rates than would normally be the case if the untaxed proceeds of

crime were legitimate. We also pay more taxes for public works expenditures inflated by

corruption. And those of us who pay taxes pay more because of those who evade taxes. So we all

experience higher costs of living than we would if financial crimes including money laundering

were prevented.

Money laundering distorts assets and commodity prices and leads to misallocation of resources.

For financial institutions 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 launderers often use front companies, which co-mingle the proceeds of illicit activity

with legitimate funds, to hide the ill-gotten gains. These front companies have access to

substantial illicit funds, allowing 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, and citizens to criminals. Furthermore, the sheer magnitude of the

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economic power that accrues to criminals from money laundering has a corrupting effect on all

elements of society.

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, by weakening collective ethical standards, corrupts our democratic institutions.

When money laundering goes unchecked, it encourages the underlying criminal activity from

which such money is generated.

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A nation cannot afford to have its reputation and financial institutions tarnished by involvement

with money laundering, especially in today's global economy. Money laundering erodes

confidence in financial institutions (FIs) and the underlying criminal activities like fraud,

counterfeiting, narcotics trafficking, and corruption weaken the reputation and standing of any

financial institution. Actions taken by FIs to prevent money laundering are not only a regulatory

requirement, but also an act of self-interest. A financial institution tainted by money laundering

accusations from regulators, law enforcement agencies, may loss their good market reputation

and damage the reputation of the country. It is very difficult and requires significant resources to

rectify a problem that could be prevented with proper program.

Besides its effect on macro level, ML & TF also affects individual financial institution. If a

money launderer uses a financial institution for making his/her money legitimate, the business of

that financial institution may hamper. If the money launderer withdraws his/her deposited money

from an FI before maturity, the FI will face liquidity crisis if the amount is big enough.

Moreover, if it is found that an FI was used for ML & TF activities, and it did not take proper

action against that ML & TF as per the laws of the country, the FI will have to face legal risk.

Finally, the reputation of an FI can also be heavily affected through its involvement with ML &

TF activities.

It is generally recognized that effective efforts to combat ML, TF & PF cannot be carried out

without the co-operation of financial institutions, their supervisory authorities and the law

enforcement agencies. Accordingly, in order to address the concerns and obligations of these

three parties, these Guidance Notes are drawn up.

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38

CHAPTER-04

pREvention of money laundering & Terrorist

financing by bdbl

4.1 procedures Followed In BDBL To Combat Money Laundering and Terrorist Financing

BDBL identified the money laundering as one of its core risk areas and has been making all out

efforts to prevent money laundering. For mitigating the risk, the bank has designated Chief Anti-

Money Laundering Compliance Officer (CAMLCO) at central compliance unit under Anti

Money Laundering Division, Head Office, who has sufficient authority to implement and efforce

corporate wide AML policy, procedure and measure who is reporting directly to the Senior

Management and the Board of Directors, moreover every branch of this bank has a designated

Branch Anti-Money Laundering Compliance officer (BAMLCO) under Branch Anti-Money

Laundering Compliance Unit, who independently reviews the transaction of accounts, with

verification of Know Your Customer (KYC) and Suspicious Transaction Report (STR).

The Central Compliance Unit has also arranged Training/Workshop for developing awareness

and skill regarding AML activities of Executives and Officers of the bank and conducting

inspection regarding AML activities of the branch Bank has established a Manual for Prevention

of money laundering and issues circulars time to time giving specific guidelines in accordance

with Bangladesh Bank guidelines, regulations, Anti-Money Laundering Act, 2002 And Anti-

Terrorism Act, 2012. All the guidelines and circulars issued by Bangladesh Bank from time to

time are being strictly complied with by Central Compliance Unit and branches of the Bank.

4.1.1 Compliance Structure Of BDBL

It deals with AML and CFT compliance of the bank and the reporting procedure. This includes-

Central Compliance Unit (CCU)

Chief Anti-Money Laundering Compliance Officer (CAMLCO)

Branch Anti-Money Laundering Compliance Officer (BAMLCO)

39

4.2 Money Laundering and Terrorist Financing Prevention Structure of BDBL

Fig 4.1: Prevention Structure Of BDBL

Chief Executive Officer (CEO)

Central Compliance Unit (CCU)

Chief Anti-Money Laundering Compliance Officer

CAMELCO

Deputy CAMELCO

Members & Employees of branch management

Department

BAMELCO

Operation Officer in branch

40

4.2.1 Operation Officer Responsibilities In Branch

Perform due diligence on prospective clients prior opening an account.

Be diligent regarding the identification of account holder and the transactions relating to

the account.

Ensure all required documentation is completed satisfactorily.

Complete the KYC profile for the new customer.

Ongoing monitoring of customers KYC profile and transactions activity.

Obtain documentary evidence of large cash deposits.

4.2.2 Branch Anti-Money Laundering Compliance Officer (BAMLCO) Of BDBL

BDBL has experienced Branch Anti-Money Laundering Officer (BAMLCO) in every branch.

The manager, the second man of the branch or a high official experienced in general banking

shall be nominated as the BAMLCO. The BAMLCO has to have detailed knowledge in the

existing acts, rules and regulations, BFIU’s instructions and BDBL own policies on preventing

Money Laundering and Terrorist Financing. BAMLCO do 5 types of work in branch-

Know Your Customer

Transaction monitoring

Identifying and reporting of suspicious transactions

Record keeping

Training

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4.2.2.1 Responsibilities of BAMLCO

The BAMLCO should perform the following responsibilities;

1. Ensure that the KYC of all customers have done properly and for the new customer KYC

is being done properly.

2. Ensure that the UN security council and domestic sanction list checked properly before

opening of account and while making any international transactions.

3. Keep information of ‘dormant accounts’ and take proper measures so that any withdrawal

from these accounts shall not be allowed without compliance of BFIU’s instruction.

4. Ensure regular transaction monitoring to find out any unusual transaction.

5. Review cash transactions to find out any structuring.

6. Review of CTR to find out STR.

7. Ensure the checking of UN sanction list before making any foreign transaction.

8. Ensure that all the employees of the branch are well aware and capable to identify any

unusual transaction or any attempt of unusual transaction.

9. Compile self-assessment of the branch regularly and arrange quarterly meeting regularly.

10. Accumulate the training records of branch officials and take initiatives including

reporting to CCU, HR and training academy.

11. Ensure all the required information and document are submitted properly to CCU and any

freeze order or stop payment order are implemented properly.

12. Follow the media report on terrorism, terrorist financing or other offences like corruption,

bribery, gold smuggling, kidnapping.

4.2.3 Members and Employees of Branch Management Department of BDBL

If BAMLCO finds any suspicious transaction he/she must make a Suspicious Transaction

Report (STR). Then it is send to the members and employees of branch management

department for investigation. All the members and employees review the document and try to

find out about the information of the suspicious client. if any suspicious information comes

42

out then they inform the Deputy CAMLCO. Then the Deputy CAMLCO takes all the

necessary steps.

4.2.4 Deputy CAMLCO

In BDBL the head of the branch management dept. is known as Deputy CAMLCO. If any

suspicious transaction and information is arisen regarding a client it is sent to the Deputy

CAMLCO for taking necessary steps and the Deputy CAMLCO analyzes all the information

that is collected by the employees of branch management and if all the information is right

then he signatures on it then send it to the CAMLCO for further investigation and necessary

steps.

4.2.5 Chief Anti-Money Laundering Compliance Officer (CAMLCO) of BDBL

BDBL designates a Chief Anti-Money Laundering Compliance Officer at its head office who

has sufficient authority to implement and enforce corporate wide AML & CFT policies,

procedures and measures and who will report directly to CEO or MD. CAMLCO should not

be bellow the 2 step below the MD or CEO. This provides evidence of senior management’s

commitment to efforts to combat money laundering and terrorist financing.The CAMLCO is

responsible for oversight of the bank’s compliance with the regulatory requirements on

systems and controls against money laundering and terrorist financing.

The name of CAMLCO is-

43

Md. Syeedul HuqDGM, Banch Management

DepartmentHead Office,BDBL

Dhaka.

4.2.5.1 Authorities & Responsibilities of CAMLCO

Authorities

1. CAMLCO should be able to act on his own authority.

2. He/She should not take any permission or consultation from/with the MD or CEO

before submission of STR/SAR and any document or information to BFIU.

3. He/She shall maintain the confidentiality of STR/SAR and any document or

information required by laws and instructions by BFIU.

4. He/She must have access to any information of the bank.

5. He/She shall ensure his/her continuing competence.

Responsibilities

1. CAMLCO must ensure overall AML & CFT compliance of the bank.

2. Oversee the submission of STR/SAR or any document or information to BFIU in

time.

3. Maintain the day-to-day operation of the bank’s AML & CFT compliance.

4. CAMLCO shall be liable to MD,CEO or BOD for proper functioning of CCU.

5. CAMLCO shall review and update ML&TF risk assessment of the bank.

6. Ensure that corrective actions have taken by the bank to address the deficiency

identified by the BFIU or BB.

4.2.6 Central Compliance Unit (CCU)

The central compliance unit must be headed by a high official. The CCU shall issue instructions

for the branches, where transactions monitoring system, internal control system, policies and

techniques will be included to prevent money laundering and terrorist financing. The CCU will

report to BFIU without any delay in case of any account/business relationship found with any

person/entity whose name/names appeared to the mass media (TV or News Paper) regarding

ML,TF,PF or any predicate offences under MLPA, 2012. The CCU could also make a

Suspicious Transaction Report (STR) or Suspicious Activity Report (SAR) directly to BFIU in

this regard.

44

The CCU of BDBL has been established in the head office and it consists of 5 officials. Among

them 2 officials are familiar with general banking and 1 is expert in information technology.

4.2.6.1 Authorities and Responsibilities of the CCU

CCU is the prime mover of BDBL for ensuring the compliance of AML& CFT measures. Its

main responsibilities are to-

1. Develop banks policy, procedure and strategies in preventing ML,TF&PF.

2. Coordinate banks AML&CFT compliance initiatives.

3. Coordinate the ML and TF risk assessment of the bank and review thereon.

4. Present the compliance status with the recommendations before the CEO or MD on half

yearly basis.

5. Forward STR/SAR and CTR to BFIU in time and in proper manner.

6. Report summary of self-assessment and independent testing procedure to BFIU in time

and in proper manner.

7. Impart training, Workshop. seminar related to AML and CFT for the employees of the

bank.

8. Take required measures to submit information, report or documents in time.

For shouldering these responsibilities bank authority may consider to give the following

authority to CCU –

Appointment of BAMLCO and assign their specific job responsibilities

Requisition of human resources and logistic supports for CCU.

Make suggestion or administrative sanction for non-compliance by the employees.

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4.2.7 CEO or MD Responsibilities

The managing director of BDBL is-

He is the authorized person who control the whole reporting structure of money laundering and

terrorist financing prevention work process. If any big problem arise he solve it and give

instruction.

4.3 Techniques Used by BDBL to protect Money Laundering and Terrorist Financing

4.3.1 Know Your Customer (KYC) program

Know your customer (KYC) is a risk based approach of BDBL with respect to profiling of

customers with a proactive anticipation of their propensity to launder money or conduct any

other illegal activity. The KYC program is a unique program practiced at BDBL. It involves the

necessity of the bank to get acquainted to the customers on a personal note to ensure that the

customers are not engaged in any suspicious activities that might affect smooth flow of the

bank’s operations.

An effective KYC procedure is fundamental part of any Anti-Money Laundering internal control

regime. They can reduce the risk of accounts being used for Money Laundering or terrorist

financing and can help identify suspicious transactions. They can also protect the Bank against

fraud and other reputation risks.

4.3.1.1 KYC Form

KYC includes customers identification (evidence of identity and address), but, depending on the

risk associated with an account, it can also extend to more detailed due diligence about the

46

Dr. Md. Zillur RahmanManaging DirectorHead Office,BDBL

Dhaka

customer and their business. This page contains all necessary background information about the

client and even the clients source of wealth. If bank officials asked to a client, under new AML

rules and regulations, she/he has to show proof of wealth which is attached with the KYC. KYC

is an ongoing process and does not end when account opening procedures are completed. A

typical KYC form is attached in appendix.

4.3.1.2 Risk Assessment

In the account opening form there is a part called risk assessment. In this part the customers are

categorized in three segments according to their occupation. The customers are categorized into

high, moderate, low risk level. Without the risk assessment no account can be open. It is done by

the account opening officer. Before opening an account the officer has to categorize the customer

one of this level.

Fig 4.2: Risk assessment on customer Level Of BDBL

Staff/Officer

Assessment or

customer provided KYC Profile Risk Classification Frequency of

Monitoring and Review

4.3.1.3 Periodic KYC Review for All Levels

The KYC basically does the client profiling, i.e. obtain the client relevant background information and document. As already mentioned the KYC process does not stop when the account is opened. The information gathered on the customer is used periodically to evaluate the appropriateness and reasonableness of the client transaction activity.

The first and foremost objective of the review is to keep the KYC information up to date. That is why KYC is an ongoing process and KYC data must be amended when the customers notifies the bank of any changes.

47

Secondly, this periodic review is to check that the activity on the account is consistent with knowledge gained on the customer and an understanding of the nature of the transaction they do and their business. This will ensure that the risk rating for the account remains correct.

4.3.2 Transaction Profiling (TP)

The transaction profile gives a general idea about the number of transaction that a customer will conduct in a month. The form contains information such as:

Nature of the profession.Source of funds.Cash Deposit and Withdrawal per month along with expected volume.Cheque Deposit and Withdrawal per month along with expected volume.Inward and Outward Remittance per month along with the expected volume.Demand draft, Telegraphic Transfers and Payment Order per month along with expected volume.

4.3.3 Cash Transaction Report (CTR)

Every month BDBL has to send a report to the Central Compliance Unit, Head Office, which is known as Cash Transaction Report (CTR). In this report, every cash transaction of the branch has to be reported to the Central Compliance Unit. Head Office by using FIU reporting system software provided by Bangladesh Bank. Finally the Head Office sends the report to Anti-Money Laundering Department of Bangladesh Bank. Possible areas to monitor could be :-

Transaction typeFrequencyUnusually large amountsGeographical origin/destinationChange in account signatories

4.3.4 Suspicious Transaction Report (STR)

It is another type of report which has to be sent to the Bangladesh Bank. The transaction which amounts started from 700001 are suspicious in nature to the bank authority, has to be reported to the Bangladesh Bank immediately through the Central Compliance Unit, Head Office. The Bangladesh Bank then verifies and judges the source of the transaction whether legal or illegal. If Bangladesh Bank founds anything illegal, it takes necessary steps against the party.

48

4.4 Reporting Go AML

4.3.5 Online Banking

Online banking transaction is very helpful to do money laundering and terrorist financing. In this sector BDBL do a perfect investigation and BDBL do not allow the full amount transaction at a time.

4.3.6 Wire Transfer

Money launders use the wire transfer or massage system to transfer money. In this system BDBL collect all detail information of sender and receiver and record all the activities and information about the transaction with a continuous observation. There are two types of wire transfer rules-

1. Cross country wire transfer : If the transaction cross 1000 USD it need further carefull observation and need full information of the client.

2. Inter country wire transfer : If the transaction cross the amount of 25000 taka it need full observation and need full information of the client.

4.3.7 Record Keeping

BDBL retains correct and full records of customers identification and transactions at least for five years after termination of relationships with the customers is an essential constituent of the audit trail that law seek to establish.

4.3.8 Training and Awareness

BDBL provides training to the officers engaged in financial activities in order to combat money laundering. Training is provided for identification, reporting and record retention. Training is important to prevent money laundering and for identification, record keeping and internal reporting and recognition and handling of suspicious transactions.

By go AML BDBL officers do some procedures, these are follows-

1. User Creation2. Transactions data entry3. XML generation4. XML file save and print5. Submit full report to Bangladesh Bank.

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4.5 Reporting System Flowchart Of BDBL

Detect unusual transaction/activity

Evaluate by BAMLCO

Arrange proper documents and sent to CCU

Check the sufficiency of documents by CCU

Report to BFIU

Fig 4.3: Reporting System Flowchart Of BDBL

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Close with proper records

Findings

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CHAPTER-05 Findings & Analysis

5.1 Findings

BDBL has skilled financial management, good credit control and few bad debts.

One of the fundamental objectives of BDBL is to boost up small and medium scale industries ,which makes a special perception about the bank.

BDBL is unique in its nature having both specialized and commercial operation it is regarded as a development bank as well as commercial one.

Online banking operation and branch banking facility.

A strong balance sheet. Access to extensive credit, a strong credit rating, and a good relationship with the bank and the other source of finance.

Effective research and development, use of design and innovation.

Skilled employees, successful recruitment, and effective training and development.

Govt. support and Encouragement.

BDBL follows leading finance

5.2 Analysis

CAMEL (capital adequacy, asset quality, management quality, earnings, liquidity) rating by Bangladesh Bank is not so good. This rating measures the performance of the bank for preventing money laundering and terrorist financing . it is only 3.2 on the scale of 5.Cash transaction report send to the Bangladesh Bank in monthly basis, it is creating a way to increase the chances for terrorist financing.Agent banking and mobile banking creating a bunch of money laundering opportunity.A long time account freezing because of BIFU investigation can harm the long term relation between the client and bank.

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The self- assessment procedure takes a long time which is six month can slow down the self-judgement policy.There is not enough number of employees to work about money laundering and terrorist financing.Need of a go AML operator for all time in office hour.

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54

CHAPTER-06 Recommendations & Conclusion

6.2 Conclusion

6.1 Recommendations

BDBL should improve its total working process speed and efficiency of preventing money laundering and terrorist financing to get a good CAMEL rating by Bangladesh Bank.

BDBL should complete its investigation in 2 working days and Bangladesh Bank response time should be 3 working day for achieving a faster procedure.Cash transaction report send to the Bangladesh Bank in monthly basis, it should be changed. The spending procedure should be done in a weekly basis.Agent banking and mobile banking creating a bunch of money laundering opportunity so this system should be drag into a high observation module.A long time account freezing because of BIFU investigation can harm the long term relation between the client and bank. So there should be a new regulation to give a small opportunity to transaction money by Bangladesh Bank.The self- assessment procedure takes a long time which is six month can slow down the self-judgement policy. It can be done in every month that’s why it can make the worker more motivated.A go AML should be appointed for all time in office hour.

BDBL is one of the prime development financing institutions in Bangladesh to accelerate the

pace of industrialization of the country. It plays significant role in the industrial development of

Bangladesh. As a finance institution it has both strength and weakness. Though it is said, that the

contribution to prevention of money laundering and terrorist financing of BDBL is below the

expectation only 3.2 rating given by Bangladesh Bank , at present BDBL has taken so many

steps for the prevention of money laundering and terrorist financing. And BDBL is working with

Bangladesh Bank now a days. It can be hoped that it is not a long time when BDBL will fully

successful to do its duty to prevent of money laundering and terrorist financing by developing its

current issues.

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ACRONYMS

AA/C AccountsAML Anti-Money LaunderingATF Anti- Terrorist FinancingAMLP Anti-Money Laundering policyAMLD Anti -Money Laundering Division

BBB Bangladesh BankBAMLCO Branch Anti-Money Laundering compliance officer

CCSO Customer service officerCBL City Bank LimitedCAMLCO Chief Anti-Money Laundering Compliance Officer

FFATF Financial Action Task Force

IIGSA Interpol General Secretariat AssemblyITP independent Testing ProcedureICCD Internal Control and Compliance Division

JJMLSG Joint Money Laundering Sterling Group

KKYC Know Your Customer

MML Money LaunderingMTO Management Trainee OfficerMoF Ministry of Finance

NNCC National Coordination Committee

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PPEPs Politically Exposed PersonsPEPs Politically Exposed Persons

RRO Relationship Officer

SSRT Suspicious Transaction Report

TTP Transaction ProfileTMP Transaction Monitoring ProcessTT Telegraphic Transfer

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REFERENCES

Annual report of Bangladesh development bank limited – 2013, 2014Bangladesh bank – 2013Bangladesh Bank’s Guide line to prevent Anti- money LaunderingAnti- Money Laundering Act Published in 2009 by Bangladesh Bank.Anti- money laundering Act-2009Anti-money laundering ordinance-2009Money Laundering Prevention Act, 2012Walker, j. and Unger, B. (2009), ‘Measuring global money laundering: The Walker Gravity Model’, Review of Law and Economics, 5(2), and 821-53.BDBL Internal Source

http://www.bdbl.com.bd http://www.bb.org.db/

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