The Money Laundering Prevention Act (MLPA) of 2002 is the primary anti-money laundering (AML) legislation in Bangladesh. A 2003 World Bank report observes that the enactment of the MLPA has given a powerful boost to AML vigilance in Bangladesh. The report also states that the Bangladesh Bank has the authority and responsibility of implementing and enforcing the MLPA, with powers to investigate and try money laundering offences, and seize and freeze money-laundering related assets. Bangladesh is also taking steps to strengthen its AML measures with amendments to the 2002 MLPA. The Anti-Money Laundering and Terrorist Financing Act, drafted in 2005 to amend and replace the 2002 MLPA, was stalled due to the prevailing political instability. The 2003 World Bank report points out that the major challenges facing AML efforts in Bangladesh include: (1) building capacity for better identification and investigation of money-laundering offenses; (2) establishing a Financial Intelligence Unit (FIU) within the Anti-Money Laundering Department of the Bangladesh Bank with technically advanced capabilities to collect and analyze suspicious transaction reports; (3) building up the expertise of the Independent Anti-Corruption Commission and the Police Department in tracking down Money Laundering crime chains; and (4) creating awareness through training of the banks and other financial institutions in AML measures, and upgrading their information technology for tracking AML networks efficiently. The 2007 U.S. Department of State (DoS) report observes that the AML regime needs to be strengthened and terrorist financing criminalized in order for the legal framework in Bangladesh to be aligned with international standards. The report also finds that poor training, technology, and other resources are cause for concern. Among the measures recommended by the U.S. DoS report, safe harbor provisions, due diligence measures, banker negligence accountability, a viable FIU and financial intelligence collection system are the most important. However, there is insufficient information publicly available that directly addresses Bangladesh's compliance with the 40+9 Recommendations of the Financial Action Task Force (FATF).

General Overview

The Money Laundering Prevention Act (MLPA) of 2002 is the primary anti-money laundering (AML) legislation in Bangladesh. The 2003 World Bank report titled "Anti- Money Laundering and Combating the Financing of Terrorism - Regional Videoconference: South Asia Region - Bangladesh, Bhutan, and Nepal," commends the enactment of the 2002 Money Laundering Prevention Act of 2002, stating that it "has given a powerful boost to anti-money laundering vigilance in Bangladesh" (p. 20). The report also states that the Bangladesh Bank has the authority and responsibility of implementing and enforcing the MLPA, with powers to investigate, seize and freeze money laundering related assets, and investigate and try money laundering offences. It has been empowered to authorize investigations and to lodge court petitions for the seizure or freezing of assets involved in money laundering. The December 2005 issue of a monthly Deloitte Touche Tohmatsu publication, "A Month in Money Laundering" informs that Bangladesh is taking steps to strengthen its AML measures with amendments to the 2002 MLPA. The 2007 U.S. Department of State (DoS) report states that the Anti-Money Laundering and Terrorist Financing Act, drafted in 2005 to amend and replace the 2002 MLPA, was stalled due to the political instability.

The 2003 World Bank report points out the major challenges facing AML efforts in Bangladesh. These include: (1) building capacity for better identification and investigation of money laundering offenses; (2) establishing a Financial Intelligence Unit (FIU) within the Anti-Money Laundering Department of the Bangladesh Bank with technically advanced capabilities to collect and analyze suspicious transaction reports (STR); (3) building up the expertise of the Independent Anti-Corruption Commission (IACC) and the Police Department in tracking down the money laundering crime chains; and (4) creating awareness through training of the banks and other financial institutions in AML measures, and upgrading their information technology for tracking AML chains efficiently.

The 2007 U.S. DoS report also finds that the Bangladesh Bank (BB) has been training commercial banks in "know your customer" practices since 2004, when it issued the "Guidance Notes on the Prevention of Money Laundering" and also designated AML compliance as a core risk that came under the scope of annual supervision by the BB. Under the stipulations of the Guidance Notes, each bank is to establish an AML unit at its headquarters and appoint an AML compliance officer in each branch. The BB has been taking steps to train these compliance officers in accordance with the Guidance Notes. The August 2005 issue of the monthly Deloitte Touche Tohmatsu publication, "A Month in Money Laundering" notes that as part of the Government initiative to adopt an amended AML law, the senior officials and banks were to receive AML investigation training. In addition, the initiative intended to form an enforcement and prosecution agency to enforce the law by forming a national council on money laundering and terrorist financing.

The Principles

1. Legal Systems and Related Institutional Measures

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The BB's Guidance Notes on the Prevention of Money Laundering declares that the MLPA of 2002 specifically deals with money laundering, and its provisions "supercede whatever may contain in any other Act in force in Bangladesh" (p. 15). However, there is insufficient information publicly available addressing Bangladesh's compliance with this principle. The MLPA, per the Guidance Notes, spells out the definition of money laundering and provides penalties therein. With regard to banks and other financial institutions, the Act requires them to identify their customers and retain their identification information and transaction records for at least five years after termination of relationship. They are also obligated to provide this information to the BB on demand, as well as reports of any suspicious transactions. Further, non-compliance by banks and other financial institutions with respect to customer identification and record keeping stipulations of the MLPA will attract "proper action for such negligence and failure" (p. 17) by the licensing authority, including imposing fines in the range of Taka (Bangladeshi currency) ten thousand and Taka one.

The 2003 World Bank report commends the enactment of the 2002 MLPA and says that it "has given a powerful boost to anti-money laundering vigilance in Bangladesh" (p. 20). According to the report, under the MLPA "the illegal acquisition (or aiding and abetting such illegal acquisition) of monetary or other assets, as well as the transfer, transformation, or concealment of such assets, [are] offenses punishable with prison sentences from six months to seven years, and with fines up to twice the amount laundered" (p. 20). The report also states that the Bangladesh Bank has the authority and responsibility of implementing and enforcing the MLPA, with powers to investigate, seize and freeze money laundering-related assets, and investigate and try money laundering offences. It has been empowered to authorize investigations and to lodge court petitions for the seizure or freezing of assets involved in money laundering.

The December 2005 issue of a monthly Deloitte Touche Tohmatsu publication, "A Month in Money Laundering" notes that Bangladesh is taking steps to strengthen its AML measures with amendments to the 2002 MLPA. The 2007 U.S. DoS report states that the Anti-Money Laundering and Terrorist Financing Act, drafted in 2005 to amend and replace the 2002 Money Laundering Prevention Act, was stalled due to the politics involved in the national elections expected in January 2007. The draft legislation had provisions to make the FIU compliant with Egmont Group recommendations, particularly in relation to domestic and international information sharing; establish a Financial Investigation and Prosecution Office to provide a team setting for law enforcement officials for successful prosecution of cases brought to them; and address a wider range of issues related to asset forfeiture. The report, however, observes that the draft did not go all the way in terms of asset forfeiture, although the BB asserts that the omitted issues can be dealt with administratively without legal backing. Also the cabinet review of the draft weakened it by, among other things, removing provisions for the formation of an enforcement group comprising BB analysts, and police and prosecution officials. The 2005 draft also criminalized terrorist financing, and the government declared that a separate Anti-Terrorism Act would be passed before the AML law; however, the Anti-Terrorism Act was not sent to Parliament in 2006, and during its review, provisions for international cooperation were deleted.

Due to the above mentioned events, the 2007 U.S. DoS report observes that the AML regime in Bangladesh needs to be strengthened and terrorist financing criminalized for the legal framework to be aligned with international standards. It finds that poor training, and the lack of computer and other resources are cause for concern. Among other measures recommended by the U.S. DoS report, safe harbor provisions, due diligence measures, banker negligence accountability, a viable FIU and financial intelligence collection system are the most important. The DoS reports that Bangladesh is in the process of formalizing operations for an FIU. The 2002 MLPA makes the Anti-Money Laundering Unit (AMLU) of the Bangladesh Bank the de facto FIU, with powers to freeze assets without, and seize them by court order. According to the report, the BB is working towards finalizing the hardware and software components of the FIU, with the U.S. Department of Justice providing the latter.

The 2007 U.S. DoS report informs that "in 2003, Bangladesh froze a nominal sum in an account of a designated entity on the United Nations Security Council Resolution (UNSCR) 1267 Sanctions Committee's consolidated list and identified an empty account of another entity." After investigations, two local banks were fined by the BB "for failure to comply with Bangladesh Bank regulatory directives."

The U.S. DoS report of 2007 notes that carrying cash in excess of taka 3,000 outside the country is not allowed, although there is no limit on currency brought inside the country. However, individuals must declare amounts over $5,000. The December 2005 issue of the monthly Deloitte Touche Tohmatsu publication, "A Month in Money Laundering" notes that some of the AML measures planned by the Government of Bangladesh in 2005 are the "introduction of post shipment inspection, submission of bank drafts to pay import duties, and the introduction of SWIFT messaging system between commercial banks and customs authorities in ports" (p. 3).

2. Preventive Measures - Financial Institutions

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The 2007 U.S. DoS report finds that "while there is evidence of funds laundered through the official banking system, there is no indication of large-scale abuse." The BB's Guidance Notes on the Prevention of Money Laundering states that the MLPA of 2002 spells out the definition of money laundering and provides penalties. The Act requires banks and other financial institutions to identify their customers and retain their identification information and transaction records for at least five years after termination of relationship. They are also obligated to provide this information to the BB on demand, along with reports of any suspicious transaction. Further, non-compliance by banks and other financial institutions with respect to customer identification and record keeping stipulations of the Act will attract "proper action for such negligence and failure" (p. 17) by the licensing authority, including imposing fines in the range of Taka ten thousand and Taka one.

The 2007 U.S. DoS report also finds that the BB has been training commercial banks in "know your customer" practices since 2004, when it issued the "Guidance Notes on the Prevention of Money Laundering" and also designated AML compliance programs as a "core risk" that came under the scope of annual supervision by the BB. Under the stipulations of the Guidance Notes, each bank is to establish an AML unit at its headquarters, and appoint an AML compliance officer in each branch. The BB has been taking steps to train these compliance officers in accordance with the Guidance Notes. In this context, the December 2005 issue of the monthly Deloitte Touche Tohmatsu publication, "A Month in Money Laundering" states that on December 22, 2005, the BB issued new transaction reporting requirements for commercial banks, according to which any transactions over US $7, 700 are to be reported. This regulation came into effect from January 1, 2006. The 2007 U.S. DoS report mentions 236 STRs that were received by the Bangladesh Bank since 2002, though none were prosecuted, due mainly to procedural problems and deficiencies in inter-agency cooperation.

The 2005 U.S. DoS report finds that "know your customer" practices have not been fully implemented by all banks in Bangladesh. In addition, customer identification requirements are difficult to enforce, since most customers do not have passports or other forms of identity. Transaction records are also manually maintained due to lack of technology, although head offices in urban centers are moving towards computerization. In addition, Bangladesh does not have provisions for safe harbor, due diligence, or banker negligence accountability. Also, accounting policies are not at par with international standards. The 2007 U.S. DoS report, therefore, recommends Bangladesh to introduce safe harbor provisions, due diligence measures, banker negligence accountability, a viable FIU and financial intelligence collection system. Nevertheless, apart from the above information, there is little other information publicly available addressing Bangladesh's compliance with this principle.

3. Preventive Measures - Designated non-Financial Business and Professions

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The 2007 U.S. DoS report observes that "money transfers outside the formal banking and foreign exchange licensing system are illegal" in Bangladesh. However, the extensive use of the hawala or "hundi" system for money transfer and repatriating wages of Bangladeshi workers abroad outside the formal banking network poses a significant money laundering risk. The report cites a BB observation that remittances through formal channels have more than doubled between 2002 and 2006, indicating lesser use of hundi. Nevertheless, the report finds the eradication of hundi almost impossible, as it provides added benefits of tax and custom evasion, and precludes stringent scrutiny and currency controls. The report further finds that hundi is "part of trade-based money laundering and a compensation mechanism for the significant amount of goods smuggled into Bangladesh." However, there is little relevant information publicly available as to Bangladesh's compliance with this principle.

4. Legal Person and Arrangements & Non-Profit Organizations

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There is insufficient information publicly available addressing Bangladesh's compliance with this principle.

5. National and International Co-operation

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The 2007 U.S. DoS report notes that Bangladesh became a party to the UN International Convention for the Suppression of the Financing of Terrorism in 2005 and as of 2006 was a party to twelve UN Conventions and protocols on Terrorism. Further, Bangladesh is a signatory to the 1988 UN Drug Convention but is not a party to the Convention against Transnational Organized Crime. In addition, Bangladesh is a member of the Asia/Pacific Group on Money Laundering. The report recommends Bangladesh to ratify the UN Convention against Transnational Organized Crime.

According to the 2005 Bureau for International Narcotics and Law Enforcement Affairs Comparative Table published on the U.S. DoS website, Bangladesh does not provide mutual legal assistance, does not allow the international transportation of currency, and does not cooperate with international law enforcement. The 2003 World Bank report, however, observes that Bangladesh "has regularly and actively participated in global and regional dialogues and initiatives for combating money laundering and terrorist financing" (p. 20). The report brings to attention the need for international organizations to provide financial and technical support to the Bangladesh Bank so that it can improve the technology of its FIU, the Anti-Money Laundering Department, to better enable it to collect and analyze suspicious transaction reports. The report also calls for training support to the Anti-Money Laundering Department, the Bureau of Anti-Corruption and the Police Department staff. However, there is no further information publicly available as to Bangladesh's compliance with this principle.