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Laws & Regulations

The Financial Institutions Law (“FIL”) was enacted as Law No. 20/2016 on 25 January 2016, replacing the previous Financial Institutions of Myanmar Law, 1990. The enactment of the FIL helped clarify the licensing of and activities to be carried out by banks and NBFIs in the Myanmar capital market and serves as the primary legal framework governing the establishment, operation, and supervision of various financial institutions in Myanmar. The FIL has played a significant role in reforming and developing Myanmar’s financial sector. It has attracted foreign investment and promoted financial inclusion. The FIL applies to banks, non-bank financial institutions (NBFIs), and financial holding companies (FHCs). The FIL excludes insurance companies, microfinance institutions, and cooperatives. The Law establishes a licensing regime for all financial institutions by the Central Bank of Myanmar (CBM). It also specifies minimum capital adequacy ratios for different types of institutions. More information can be found here.

Money laundering (including concealment, acquisition, conversion, or use of illegally obtained funds), financing of terrorism, and predicate offenses (like drug trafficking, corruption, fraud) are prohibited under the Anti-Money Laundering Law 2014. KBZ Bank must adhere to the provisions of the Anti-Money Laundering Law (AML Law) and implement effective AML/CFT programs. This includes conducting regular risk assessments, establishing a comprehensive KYC/CDD process, implementing transaction monitoring mechanisms, and reporting suspicious transactions to the Financial Intelligence Unit (FIU). The Bank must report any suspicious transaction exceeding set thresholds or exhibiting specific red flags to the FIU. The Bank maintains adequate records of all customer information and transactions for a specific period as mandated by the AML Law. KBZ also develops and implements robust internal controls to mitigate AML/CFT risks and train their staff to identify and report suspicious activity. More information can be found here.

AML/CFT Risk Based Management Guidance Note

The Central Bank of Myanmar (CBM) directs all banks to develop effective frameworks and practices to manage their money laundering/terrorist financing risks (ML/TF). The effective management of risks is a requirement of the Basel Core Principles (BCP) for Effective Banking Supervision and the Financial Action Task Force (FATF) 40 Recommendations. The Banks shall ensure to have a comprehensive risk management process (including effective board and senior management oversight) to identify, measure, evaluate, monitor, report and control and mitigate all material risk on a timely basis (BCP 15). It is also expected that countries will ensure that Banks identify and assess ML/TF risks arising from their operations and take the measures necessary to effectively mitigate such risks. This risk assessments and any underlying information should be documented, kept up-to-date and readily available for the CBM to review at its request. More information can be found here.

The Central Bank of Myanmar issues the Directive on Customer Due Diligence (CDD) related to the Anti-money Laundering and Counter Financing of Terrorism to the banks licensed and supervised by the CBM.  It is important that banks and financial institutions licensed to operate in Myanmar have adequate controls and procedures in place so that they know the customers with whom they are dealing. Adequate customer due diligence on new and existing customers is a key part of these controls. KBZ shall adopt, develop and implement internal policies, procedures, systems, and controls to combat money laundering and terrorism financing. KBZ shall also require to undertake enhanced CDD measures when carrying out occasional transactions of a customer who has no established relationship with the bank if the transaction amount is equal to or above the threshold of Kyat or any other currencies equivalent of (USD 15,000). KBZ shall maintain records of the copies of all records obtained through the customer due diligence process and all records of transactions, both domestic and international, attempted or executed and copies of reports sent and related documents for at least five years. More information can be found here.

The Central Bank of Myanmar (CBM) issues the Guideline on Risk Management Practices of Banks. Bank needs to establish a comprehensive risk management system, overseen by the bank’s Board of Directors, to identify, measure, monitor and control their risks. Risk means the probability of a material financial loss to the bank due to exposure to, and uncertainty arising from, current and potential future events. Seven types of key financial risk (credit risk, market risk, liquidity risk, operational risk, legal, regulatory and reputational risk, strategic risk, group and related parties’ risk) are defined in the Guideline. The objectives of this Guideline are: (a) to ensure that the banks’ risk management system is appropriate to the nature, scale and complexity of their business; (b) to encourage banks to enhance their risk management practices, taking into account developments in the financial system in Myanmar and the bank’s strategy and plans for the development of its business; and (c) to set out the standards which the CBM uses in assessing risk management systems under its risk-based approach to supervision. More information can be found here.