Bangladesh Bank has tightened its rules for non-bank financial institutions against money laundering and terrorist financing, aiming to effectively check the menace.

The chief anti-money laundering compliance officer of each institution must submit an annual report to the BB's Financial Intelligence Unit (BFIU) by January 15 every year, according to a notice issued by the central bank yesterday.

The Central Compliance Unit (CCU) in each institution has to submit a report on anti-money laundering and terrorist financing activities, progress report and recommendations to the chief executive of the institution on a half yearly basis.

Later, the CEO will forward the report to the board of directors and the BFIU.

The central bank issued a similar notice for banks in December last year. The insurance industry will also receive a similar notice soon, said Mahfuzur Rahman, executive director and chief spokesman of the central bank.

Although Rahman said there were no big changes in the latest notice, the industry players found significant additions.

The financial institutions must comply with the Money Laundering Prevention Act 2012 and Anti Terrorism Act 2009 (including amendments of 2012 and 2013), according to the notice.

A financial institution has to report to the BFIU immediately after any news regarding money laundering and terrorist financing published in mass media.

The BB has asked the institutions to increase due diligence for “politically exposed persons” and their family members and close associates.

Similar attempts must be taken by the FIs for influential persons (persons who have been entrusted domestically with prominent public functions) and their family members and close associates. It said FIs have to know their sources of income.

Also, FIs were advised to follow certain customer identification procedure for opening of accounts and monitoring transactions of a suspicious nature for the purpose of reporting it to the BFIU.

The know-your-customer (KYC) policy is no more limited to the accountholder only, according to the notice.

From now on, KYC of a beneficiary has to be ensured. In case of a company, shareholders having 20 percent or more shares will be considered as a beneficial owner, and separate KYC has to be done for them. 

If a customer fails to meet due diligence standards, the financial institution must not open account, or will close existing account with a prior notification to customer and higher management.

The notice also stressed using anti-money laundering and terrorist financing issues before the recruitment of employees.