Myanmar: FATF’s Call for Action to Apply Enhanced Due Diligence MeasuresOctober 27, 2022
As Financial Action Task Force (“FATF”) reported, one of the outcomes of the FATF 20-21 October 2022 Plenary, was that Myanmar has been added to the list of “jurisdictions subject to a call for action”.
FATF is an ‘inter-governmental body’ that ‘works to generate the necessary political will to bring about national legislative and regulatory reforms’ in the areas of prevention of money laundering and terrorism financing. It currently has as its members 37 countries and 2 regional organisations.
In its statement, FATF “calls on its members and other jurisdictions to apply enhanced due diligence measures proportionate to the risk arising from Myanmar.”
What is expected from Myanmar
In its statement, FATF noted that Myanmar should continue to work on implementing its action plan to address earlier identified deficiencies, including by: (1) demonstrating an improved understanding of ML risks in key areas; (2) demonstrating that on-site/offsite inspections are risk-based, and hundi operators are registered and supervised; (3) demonstrating enhanced use of financial intelligence in LEA investigations, and increasing operational analysis and disseminations by the FIU; (4) ensuring that ML is investigated/prosecuted in line with risks; (5) demonstrating investigation of transnational ML cases with international cooperation; (6) demonstrating an increase in the freezing/seizing and confiscation of criminal proceeds, instrumentalities, and/or property of equivalent value; (7) managing seized assets to preserve the value of seized goods until confiscation; and (8) demonstrating implementation of targeted financial sanctions related to PF. The FATF urged Myanmar to work to fully address its AML/CFT deficiencies and noted that Myanmar will remain on the list of countries subject to a call for action until its full action plan is completed.
Clarifications from Central Bank of Myanmar
Central Bank of Myanmar in its press release on 22 October 2022 stressed that FATF’s designation level for Myanmar is different from that for Iran and Democratic People’s Republic of Korea (DPRK). Iran and Democratic People’s Republic of Korea (DPRK) are subject to “call to apply counter-measures”. CBM further noted that Myanmar already achieved 24 recommendations out of 40 set by FATF and has established the appropriate Action Plan.
Impact on Myanmar banks and companies
In relation to the cross-border settlements, Myanmar banks and companies can be expected to liaise with their international counterparts with respect to the provision of information for the purposes of the enhanced due diligence. This might include more detailed information in relation to the customer(s), nature of business relationships, sources of funds and other. For planning and budgeting purposes it therefore may be necessary to allocate additional time that may be needed to perform cross-border transfers.
FATF Standards and Recommendations; their application and practical impact
FATF produced several sets of recommendations and standards for combating money laundering, the financing of terrorism and the proliferation (spread) of weapons of mass destruction.
In 2012 FATF published International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation.
Among other things, the standards, provide in section 19, that financial institutions should be required to apply enhanced due diligence measures to business relationships and transactions with natural and legal persons, and financial institutions, from countries for which this is called for by the FATF. The type of enhanced due diligence measures applied should be effective and proportionate to the risks.
The more precise practical implications on Myanmar and cross-border transfer remain to be seen. However, it should be noted that as of now a number of restricting and foreign exchange control measures have already been implemented both externally and internally within the country.
Importantly, FATF in its latest announcement also noted that when applying enhanced due diligence measures, countries should ensure that flows of funds for humanitarian assistance, legitimate NPO activity and remittances are not disrupted.