Lawyers in preventing Money Laundering and Terrorist Financing (August, 2016, Issue 1)

August 17, 2016, by Junayed Chowdhury

Despite Bangladesh not being a regional financial center, its geographic location coupled with seaports and long porous borders with India and Myanmar exposes it to corruption and trafficking in persons. These are among the principal sources of criminal proceeds for money laundering. Bangladesh is also vulnerable to terrorist financing. Therefore, it is imperative for Bangladesh to establish safeguards against money laundering and adequately criminalise financing of terrorism to ensure stability and integrity of its financial system. Both money laundering and terrorist financing are criminal offences under the laws of Bangladesh.

Money laundering has been defined in section 2 of the Money Laundering Prevention Act, 2012 (“the MLA”). In a nutshell, this covers all kinds of methods through which the true origin and ownership of the proceeds of criminal activities is concealed. On the other hand, financing of terrorism has been defined in section 7 of the Anti-Terrorism (Amendment) Act 2009 (“the ATA”). In short, terrorist financing covers the support, financial or otherwise, provided to encourage, plan or engage in terrorist activities.

Pursuant to section 23 of the MLA, the Bangladesh Bank issued BFIU Circular No. 08/2013 dated 29.10.2013 titled “Guidelines on prevention of money laundering & combating financing of terrorism for Designated Non-Financial Businesses and Professions” (“the Guideline”). This Guideline was issued to enable Designated Non-Financial Businesses and Professions (“DNFBPs”) to keep in place effective preventative measures against money laundering and terrorist financing related issues and to establish money laundering and terrorist financing risk free business.


Although anti-money laundering and counter terrorist financing is everyone’s responsibility, some sectors are prone to greater risk such as accountants, lawyers, real estate developers, precious metals and precious stones dealers and trust and company service providers, etc. These sectors have been termed as DNFBPs in the Guideline as has also been termed as “reporting organization” in section 2(w)(ix-xii) of the MLA and “reporting agency” in section 2(20)(i),(j),(k),(l) of the ATA.


The Guideline is designed for better understanding of money laundering, terrorist financing, suspicious transaction reporting and suspicious activity indicators. It includes a compliance program covering customer due diligence and maintaining international regulatory standards.


Under the Guideline, every reporting organization – including DNFBPs – in Bangladesh must put in place an anti-money laundering program for its business and provide training to its employees in this regard. The reporting organizations and DNFBPs are subject to inspection by the Bangladesh Financial Intelligence Unit (“BFIU”) and may be sanctioned if they fail to meet their legal obligations under the MLA, the ATA and the Guideline.


As per the Guideline, when DNFBPs come across any property, which are known or suspected to have originated from crime proceeds, it should submit a Suspicion Transaction Report (“STR”) to the BFIU. Reporting of STR is a legal obligation under the MLA and ATA. Failing to report knowledge or suspicion of crime proceeds or terrorist property is punishable under the MLA and the ATA.


Further, the DNFBPs must always conduct Customer Due Diligence (“CDD” or “Know your Customers and their transactions”), i.e., maintain proper records of transactions and have in place a proper internal control system. Therefore, the DNFBPs must know who they are dealing with, the beneficiaries of the transaction, the purpose and nature of the transaction, and the sources of the fund involved. STR and CDD are two core money laundering and terrorist financing counter-measures implemented for the benefit of the DNFBPs.


For failure to meet obligations under the MLA and the ATA, the BFIU can impose fines up to Tk 25,00,000/- and can also cancel or suspend the license or the authorization for carrying out commercial activities of the said organization or any of its branches, service centers, booths or agents, as the case may be.


Self-Regulatory Organizations (SROs) such as Bar Council and different lawyers associations regulating DNFBPs such as lawyers and notaries create a bridge between the BFIU and individual professionals or entity in this sector. The associations may impose conditions upon the lawyers to follow the anti-money laundering and counter-financing terrorism norms, direct lawyers’ association to follow the norms of anti-money laundering and counter-financing terrorism, impose obligation of compliance on its members, check the compliance of the members and impose penalty for lapses, and finally assist BFIU or other law enforcement agencies to help prevent money laundering and counter-financing terrorism.


Legal professionals provide a wide range of services like tax advice, company formation, property transactions, etc. These are very attractive gateways which criminals/terrorists would want to use for laundering crime proceeds/financing terrorism. Given the likelihood of being used for money laundering/terrorist financing purposes, legal professionals must be vigilant at all times and report anything suspicious to BFIU. Such responsibility must ensure compliance by all members of the lawyers’ associations at all times.


Written by Junayed Chowdhury, Managing Partner  


† Disclaimer: The opinions and comments expressed in this Blawg are not to be regarded or construed as legal advice by and from Vertex Chambers or any of its members. It is highly advisable that any person should seek independent legal advice before relying on any of the contents of this Blawg.