An assessment of the anti-money laundering (AML) / counter-terrorist financing (CFT) measures in place in Bangladesh: ratings, key findings and priority actions.

1. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 1
Anti-money laundering and counter-
terrorist financing (AML/CFT)
measures in Bangladesh
Fourth Round Mutual Evaluation
Key findings, ratings and priority actions
October 2016
www.fatf-gafi.org/publications/mutualevaluations/documents/mer-bangladesh-2016.html

2. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016
Ratings – Effectiveness (1/3)
2
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which
Bangladesh
has achieved
this objective
1. ML and TF risks are understood and, where appropriate,
actions co-ordinated domestically to combat ML and TF
Moderate
2. International co-operation delivers appropriate information,
financial intelligence, and evidence, and facilitates action
against criminals and their assets
Substantial
3. Supervisors appropriately supervise, monitor and regulate
financial institutions and designated non-financial
businesses and professions (DNFBPs) for compliance with
AML/CFT requirements commensurate with their risks.
Moderate
4. Financial institutions and DNFBPs adequately apply AML/CFT
preventive measures commensurate with their risks, and
report suspicious transactions.
Low

3. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 3
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which
Bangladesh
has achieved
this objective
5. Legal persons and arrangements are prevented from misuse
for money laundering or terrorist financing, and information
on their beneficial ownership is available to competent
authorities without impediments
Low
6. Financial intelligence and all other relevant information are
appropriately used by competent authorities for money
laundering and terrorist financing investigations.
Moderate
7. Money laundering offences and activities are investigated
and offenders are prosecuted and subject to effective,
proportionate and dissuasive sanctions
Low
8. Proceeds and instrumentalities of crime are confiscated. Low
Ratings – Effectiveness (2/3)

4. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 4
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which
Bangladesh
has achieved
this objective
9. Terrorist financing offences and activities are investigated
and persons who finance terrorism are prosecuted and
subject to effective, proportionate and dissuasive sanctions.
Substantial
10. Terrorists, terrorist organisations and terrorist financiers are
prevented from raising, moving and using funds, and from
abusing the non-profit sector.
Moderate
11. Persons and entities involved in the proliferation of weapons
of mass destruction are prevented from raising, moving and
using funds, consistent with the relevant United Nations
Security Council Resolutions.
Substantial
Ratings – Effectiveness (3/3)

5. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 5
Ratings – Effectiveness
December 16
0
3
4
4
High
Substantial
Moderate
Low

6. 13-Dec-16
6
Ratings – technical compliance
(1/5)
AML/CFT POLICIES AND COORDINATION
1. Assessing risks & applying a risk-based approach ParPa Pa Pa Partially compliant
2. National cooperation and coordination LarLarLarLar Largely compliant
MONEY LAUNDERING AND CONFISCATION
3. Money laundering offence LarLarLarLar Largely compliant
4. Confiscation and provisional measures LarLarLarLar Largely compliant
TERRORIST FINANCING AND FINANCING OF PROLIFERATION
5. Terrorist financing offence LarLarLarLar Largely compliant
6. Targeted financial sanctions related to terrorism & terrorist
financing ComCo Co Co Compliant
7. Targeted financial sanctions related to proliferation LarLarLarLar Largely compliant
8. Non-profit organisations LarLarLarLar Largely compliant

7. 13-Dec-16
7
Ratings – technical compliance
(2/5)
PREVENTIVE MEASURES
9. Financial institution secrecy laws Pa ParParPa Partially compliant
Customer due diligence and record keeping
10. Customer due diligence LarLarLarLar Largely compliant
11. Record keeping Co ComComCo Compliant
Additional measures for specific customers and activities
12. Politically exposed persons LarLarLarLar Largely compliant
13. Correspondent banking LarLarLarLar Largely compliant
14. Money or value transfer services LarLarLarLar Largely compliant
15. New technologies Co ComComCo Compliant
16. Wire transfers Pa ParParPa Partially compliant

8. 13-Dec-16
8
Ratings – technical compliance
(3/5)
PREVENTIVE MEASURES (continued)
Reliance, Controls and Financial Groups
17. Reliance on third parties LarLarLarLar Largely compliant
18. Internal controls and foreign branches and subsidiaries Pa Pa Pa Pa Partially compliant
19. Higher-risk countries Pa Pa Pa Pa Partially compliant
Reporting of suspicious transactions
20. Reporting of suspicious transactions Co Co Co Co Compliant
21. Tipping-off and confidentiality Co Co Co Co Compliant
Designated non-financial Businesses and Professions (DNFBPs)
22. DNFBPs: Customer due diligence LarLarLarLar Largely compliant
23. DNFBPs: Other measures LarLarLarLar Largely compliant
TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL
PERSONS AND ARRANGEMENTS
24. Transparency and beneficial ownership of legal persons Pa Pa Pa Pa Partially compliant
25. Transparency and beneficial ownership of legal
arrangements Pa Pa Pa Pa Partially compliant

9. 13-Dec-16
9
Ratings – technical compliance
(4/5)
POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES
AND OTHER INSTITUTIONAL MEASURES
Regulation and Supervision
26. Regulation and supervision of financial institutions Pa ParParPa Partially compliant
27. Powers of supervisors LarLarLarLar Largely compliant
28. Regulation and supervision of DNFBPs Pa ParParPar Partially compliant
Operational and Law Enforcement
29. Financial intelligence units LarLarLarLar Largely compliant
30. Responsibilities of law enforcement and investigative
authorities Co ComComCo Compliant
31. Powers of law enforcement and investigative authorities LarLarLarLar Largely compliant
32. Cash couriers LarLarLarLar Largely compliant

10. 13-Dec-16
10
Ratings – technical compliance
(5/5)
POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES
AND OTHER INSTITUTIONAL MEASURES (continued)
General Requirements
33. Statistics ParPa ParPa Partially compliant
34. Guidance and feedback ParPa ParPa Partially compliant
Sanctions
35. Sanctions ParPa ParPa Partially compliant
INTERNATIONAL COOPERATION
36. International instruments LarLarLarLar Largely compliant
37. Mutual legal assistance LarLarLarLar Largely compliant
38. Mutual legal assistance: freezing and confiscation LarLarLarLar Largely compliant
39. Extradition LarLarLarLar Largely compliant
40. Other forms of international cooperation LarLarLarLar Largely compliant

11. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016 11
Ratings – technical compliance
6
22
12
0
Compliant
Largely compliant
Partially compliant
Non compliant

12. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016
Key findings
 Bangladesh has made significant progress since the last Mutual
Evaluation Report (MER) in 2009, reflecting political commitment
and leadership on AML/CFT.
 Bangladesh faces significant money laundering (ML) and
terrorism financing (TF) risks and competent authorities have a
reasonable understanding of those risks. The National Risk
Assessments (NRA) and sectoral risk assessments add to
effectiveness and guide national strategies, however they do not
comprehensively cover threats and TF. Inter-agency work to
assess TF risks shows strengths, but more work is needed to
assess foreign TF threats, to further assess ML threats and to
share information on TF risks with the private sector.
12

13. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016
Key findings
13
 Bangladesh has a range of high-level coordination committees to
set policy and coordinate AML/CFT priorities. The high-level
National Coordination Committee (NCC) is well structured and
draws on technical expertise from relevant agencies and has
been instrument in driving key AML/CFT reforms. There were
well functioning policy coordination structures for countering the
financing of terrorism (CFT) and for implementing United Nations
Security Council Resolutions (UNSCRs) against terrorism and
proliferation of weapons of mass destructions (WMD). At
operational levels, coordination and cooperation occur to a
varying degree although recent reforms have sought to address
identified issues particularly between law enforcement agencies
(LEAs).
 The 2015-17 National AML/CFT Strategy and CT strategies are, in
part, driven by findings of risk assessments. AML/CFT strategies
complement other strategies including CT priorities, but
corruption-related ML remains the biggest unmitigated risk area.

14. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016
Key findings
 Bangladesh Financial Intelligence Unit (BFIU) demonstrated
strengths in capacity and outputs. The quality of BFIU
disseminations was generally good; however improvement is
needed with the quality and quantity of reporting to the BFIU
and LEAs’ systematic use of financial intelligence for predicate
offences and ML beyond corruption cases.
 The ACC had done a significant number of ML investigations
related to corruption, but not other offences and until late 2015
Bangladesh had not sufficiently prioritised ML investigations and
prosecutions consistent with the risk profile (ie predicates
beyond corruption). At the time of the onsite visit only ML five
trials had been completed and four convictions obtained, with
214 ML prosecutions pending due to lengthy delays with the
courts. The October 2015 legislative amendments allow ML
investigations by all relevant LEAs.
14December 16

15. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016
Key findings
15
 Provisional measures and confiscation outputs by LEA were low
and most often related to instruments of crime. LEAs need to
prioritise tracing, restraint and confiscation of proceeds. The
BFIU’s powers to trace and freeze funds held on account adds to
effectiveness. Seizures and confiscations by the Bangladesh
National Board of Revenue (NBR - Customs and Tax) added
effectiveness in some high risk areas.
 Lengthy delays and capacity challenges in the justice system
undermine effectiveness. The courts and the Attorney-General’s
Office (AGO) are seriously under-resourced. ML and predicate
trials are often delayed over many years and issues with judicial
independence of the lower courts add to capacity challenges.
Special Courts give the greatest priority to CT and terrorism trials
and the TF trials have not been delayed.

16. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016
Key findings
 Bangladesh has conducted preliminary investigations (enquiries)
into a large number of TF cases and a full investigation of 23
cases. A small number of TF prosecutions have been successful
and a number are pending. Bangladesh’s focus on terrorism
prevention and de-radicalisation adds to effectiveness. While
Bangladesh has managed to combat TF threats related to ISIL,
financing of foreign fighters is an emerging issue.
 Bangladesh has a comprehensive regulatory framework for
targeted financial sanctions (TFS) against terrorism. Bangladesh
has designated six (6) domestic groups under UNSCR 1373.
Outreach and implementation by reporting organisations (ROs)
has not led to ROs spontaneously identifying matches with
persons acting on behalf of designated entities to freeze assets.
Freezing has predominantly occurred in cases where LEAs arrest
members of a proscribed group and take TFS freezing actions
pursuant to the designations.
16

17. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016
 AML controls on the not-for profit (NPO) sector go significantly
beyond the obligations in the FATF standards, but are not in
keeping with TF risks. Stringent requirements on NPOs
receiving foreign funding place onerous obligations on that
part of the sector, but may not address domestic TF risks.
Oversight and supervision does not adequately target TF risk.
The recent NPO sector review considers some TF risk elements.
 Bangladesh has a comprehensive legal and regulatory
framework for TFS against WMD proliferation. Supervision of
PF-related obligations by banks was undertaken, however this
needs to be extended to other sectors. A number of case
studies demonstrate levels of effectiveness of TFS systems and
vigilance measures by authorities.
17
Key findings

18. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016
 Bangladesh has made important progress with preventive measures
for the financial sector and DNFBPs and has applied significant
resources to raise ROs’ awareness of their AML/CFT obligations. ROs
have made some progress in moving to a risk-based approach (RBA)
implementation of preventive measures and rules-based
implementation has deepened. Further implementation of key
preventive measures is needed within and beyond the banking
sector, in particular customer due diligence (CDD), domestic
politically exposed persons (PEPs) and suspicious transaction reports
(STR) reporting and wire transfers.
 Bangladesh has controls in place to prevent criminals and their
associates from entering the market, albeit with some gaps. Whilst
improvements were being made, significant fit and proper risks with
the board and management of state-owned commercial banks were
not being sufficiently mitigated.
18
Key findings

19. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016
 Bangladesh Bank (BB) needs to prioritise the RBA to supervision
consistent with the risk profile. The frequency, scope and intensity of
on-site inspections of commercial banks and non-bank financial
institutions (NBFIs) were generally sufficient however there were
inadequate resources available to undertake comprehensive
supervision across all sectors, particularly DNFBPs. Available fines
and sanctions were generally low and rarely applied.
 Measures to ensure transparency and prevent misuse of legal
persons and arrangements were not well established or
implemented. Registration requirements for basic ownership were
not well implemented. Beneficial ownership information was not
required to be collected by legal persons or parties to legal
arrangements. ROs’ obligations to understand the beneficial
ownership of customers do not sufficiently mitigate risks of misuse of
legal persons and arrangements.
19
Key findings

20. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016
 Bangladesh demonstrated its strong commitment to
international cooperation and its open and responsive
approach to fulfil requests received from foreign partners.
While the BFIU actively requests international
cooperation and there have been some important
successful mutual legal assistance (MLA) requests by
Bangladesh, the overall level and focus of requests for
international cooperation by LEAs, Customs and
prosecutors (MLA) was not in keeping with the risk
profile.
20
Key findings

21. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016
Priority Actions for Bangladesh to
strengthen its AML/CFT System
21
 MHA, ACC, NBR should instruct all LEAs to prioritise parallel
ML/TF enquiries with all predicate offences and terrorism
cases and related asset tracing and freezing in keeping with
the risk profile. Instructions should require LEAs to:
– ensure the systematic use of financial intelligence and
cooperation with BFIU.
– prioritise formal and informal cooperation between
domestic LEAs and international cooperation, in keeping
with the risk profile, to target high risk areas
– further target TF risks relating to trans-national terror
groups
– pursue MLA in keeping with the risk profile and improve
processes / mechanisms for case management &
coordination between the two central authorities.
– build capacity of each LEA’s AML/CFT units

22. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016
Priority Actions for Bangladesh to
strengthen its AML/CFT System
 Supplement National AML/CFT Strategies with detailed plans of
operational priorities (investigations, prosecutions, proceeds of
crime actions, supervision) including:
– Address the regulation and supervision of state-owned commercial
banks including improving: Finance Ministry implementation of the
fit and proper checks; on and off-site AML/CFT supervision by BB;
internal control and audit; sanctioning powers of BB.
– Prioritise active use of TFS framework under S20A of the ATA to
proactively freeze asset indirectly owned or controlled by
proscribed persons / entities.
– Conduct more in-depth risk assessments. This should include a
corruption/ML risk assessment and an assessment of TF risks,
including domestic and cross-border terror threats (Al Qaeda in the
Indian Subcontinent (AQIS), ISIL, etc.).
22

23. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016
Priority Actions for Bangladesh to
strengthen its AML/CFT System
 Increase the range, quality and timeliness of ML prosecutions
& proceeds actions:
– Address structural and resourcing issues of courts/prosecutors.
– Provide AGO with more resources to support LEAs’ prosecutions
and use of provisional measures at the enquiry stage of
investigations
– Develop and implement asset management procedures and
capacity
 Strengthen risk-based implementation of AML/CFT controls
amongst ROs through increased outreach, guidance and
supervision, with a focus on banking, securities and real
estate.
– Share available TF risk findings with the private sector.
– Deepen the RBA across all sectors, with a focus on risks from
domestic PEPs, verification of CDD, identification of beneficial
ownership, ongoing CDD, better quality STRs and deeper
implementation of TFS.

24. Anti-money laundering and counter-terrorist financing measures in Bangladesh – Mutual Evaluation Report – October 2016
Priority Actions for Bangladesh to
strengthen its AML/CFT System
 Strengthen risk-based AML/CFT supervision by BFIU, BB and
BSEC
– Increase supervisory and regulatory resources in BFIU
– BB and BSEC should prioritise their fit and proper checking,
including of the beneficial owners of FIs, to address risks from
domestic PEPs across key sectors and other supervisory
interventions.
 Amend the Companies Act 1994 and other statutes for
transparency of beneficial ownership and control of legal
persons and legal arrangements.
 Refocus NPO sector AML/CFT controls in keeping with the
FATF standards and the NGO review findings to avoid
disrupting the legitimate activities of NPOs and better target
TF risk mitigation.