Faruk Ahmed :
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 (AML) Standards and Combating Financial Terrorism Guidelines. 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 in some extents, the powerful players can ignore rules and regulators or remain quite even though newspapers repeatedly publish rule breaking incidents in financial landscape. The latest example of such incidents is an advertisement of a Mobile Financial Services Provider (MFSP) campaign which ultimately baffles people that no KYC protocol is necessary for opening a mobile banking account. Opening account only against a mobile phone number without other documents ignores 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 is foolish; instead everyone should open an account by completely side-stepping the procedure of KYC requirements during account registration as per banking regulations.
However, the central bank- Bangladesh Bank (BB) remains quite with its regulatory tools as the MFSP seems powerful for its involvement with the government and yet to come under its umbrella. Now the operator is advising people to open accounts without KYC protocol, which ultimately a challenge for the central bank to keep financial markets sound and conducive and for BFIU to check money laundering. The taunting tagline of the advertisement has raised questions about the core regulatory guidelines provided by the regulators for opening personal MFS accounts.
Seasoned bankers say any banking account without proper validation of customers through face to face interactions is risky and the 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. KYC is a process by which banks/MFS providers obtain information about the identity and address of the customers. This process helps to ensure that bank/ MFS services are not misused. 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. For mobile account opening, KYC does not an issue, so any MFS account based on mobile network account is risky for MFS transactions.
One of the major pillars on which this MFS industry is standing on 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 the bank account falls in. Banks are not obligated to share their AML guidelines with customers. So, KYC documents are 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 the Bangladesh Bank, as a result of which Bangladesh Bank had to withdraw an official recently. Every time a massive embezzlement takes place, all the corrective measures are taken when all of the embezzled money have already been siphoned off of the country and can no longer be brought back in its entirety.
An organization which continuously plays hide-and-seek regarding its operations, is involved with many questionable personalities and asks its customers to skip the regulatory directive should be under severe scrutiny. We don’t want to read more reports like the PK Halder ones, where the fund of this country becomes a mere part of an almost unbelievable story. We need to find answers to the questions such organizations are raising through insulting actions. We need to find them immediately.
(Faruk Ahmed is the Chairman of Bangladesh Journalists’ Foundation For Consumers & Investors (BJFCI). Email: [email protected]).
