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12 February, 2021 08:10:08 PM / LAST MODIFIED: 14 February, 2021 10:19:47 PM

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Should we allow MFS account without KYC protocol?

The big concern is that account opening by any bank or MFS operator with regulatory compliances of BB and BFIU is risky and may allow money laundering from Bangladesh.
Faruk Ahmed
Should we allow MFS account without KYC protocol?

Have you ever received any email or SMS from your bankers to resubmit your KYC documents and update the latest details in your bank account? They sometimes require you to visit the bank branch with your documents or may want you to update your KYC by just a reply to that email or SMS. Why this KYC is important?

KYC stands for “Know Your Customer”.

To ensure that bank’s services are not misused by the customer, and to follow the Anti-Money Laundering and Combating the Financing of Terrorism (AML&CFT) standards and combating of financial terrorism guidelines laid down by authorities, banks follow a process to obtain information about the identity and address of the customers. Banks follow this process while the opening of accounts and periodically update the same. For KYC in individual bank accounts, banks ask for a specified proof of address and identity, with the latest photograph of the customer. For current accounts, requirements vary.

But in Bangladesh, the situation is quite different. Here, powerful players can ignore rules and regulators with impunity despite the fact that newspapers repeatedly publish incidents of violations in the financial arena. The latest example of such incidents is a new advertisement campaign by a mobile financial service provider that ultimately educate people that no KYC protocol is necessary for bank account which left many consumers of Bangladesh entirely baffled. A formal communication is being circulated by the mobile financial services provider that attacks the very regulatory position of Bangladesh Bank and the Bangladesh Financial Intelligence Unit (BFIU) as institutions, who are supposed to be the ultimate regulators of the MFSPs and the PSPs. The campaign says that opening MFS accounts following steps of KYC (Know-Your-Customer) is foolish; instead everyone should open an account of the service provider by completely side-stepping the procedure of KYC requirements during account registration as per banking regulations.

However, the central Bangladesh Bank (BB) remains quite with its regulatory tools.

The taunting tagline of the advertisement has raised questions about the core regulatory guidelines provided by the regulators for opening personal MFS accounts. For more than a decade, Bangladesh Bank and the BFIU have been successfully regulating the MFS industry, which is a rare success story in the financial sector of Bangladesh. The big concern is that account opening by any bank or MFS operator without regulatory compliances of BB and BFIU is risky and may allow money laundering from Bangladesh.

Seasoned bankers say any banking account without proper validation of customers through face-to-face interactions is risky and a big challenge for mobile banking. Therefore, regulators across the globe have imposed on MFS providers to identify and validate their customers’ properly through face-to-face interactions and follow KYC/e-KYC rules to avoid any deviations.

Once MFS accounts are opened ignoring KYC rules, people can take advantage of including their near and dear ones in the list of poor people. As increasing money laundering and terror financing has become a global concern, financial regulators across the globe have introduced this KYC protocol for all banking and MFS accounts and made mandatory for banks, FIs and MFS operators.

One of the major pillars on which this MFS industry is standing is the simplified KYC introduced by Bangladesh Bank and the BFIU. As per BB guidelines, banks and MFS operators are required to periodically update the KYC records. This is a part of banks’ due diligence framework. Banks classify their customers into “Low” “Medium” and “High” risk categories, depending on their AML risk assessment criteria, internally laid down by respective banks. The periodicity of KYC update depends on the category your bank account falls in, and Banks are not obligated to share their AML guidelines with customers. So, KYC document is the only proof of identity binding an individual customer to his/her MFS account. If KYC document is not in place, any person can do any financial crime through the acquired MFS account. As per BB guidelines, banks are required to periodically update the KYC records. And KYC is required to be done at least every 2 years for high-risk customers, every 8 years for medium risk customers and every 10 years for low-risk customers.

It is most unfortunate that the PK Halder incident was allegedly connived by a few of the senior officers of Bangladesh Bank, as a result of which recently Bangladesh Bank had to withdraw an official. My question is: why the citizens are always kept in the dark regarding these incidents? Every time a massive embezzlement takes place, all the corrective measures are taken when all of the embezzled money has already been siphoned out of our country and can no longer be brought back in its entirety.


The writer is the Chairman of Bangladesh Journalists’ Foundation for Consumers & Investors (BJFCI). E-mail: [email protected]).

 

 

 

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Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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