Contents

Chapter 1 ....................................................................................................................................................... 1
Introduction ................................................................................................................................................... 1
1.1 Title of the Study .................................................................................................................................... 2
1.2 Background of the Study ........................................................................................................................ 2
1.3 Origin of the Study.................................................................................................................................. 3
1.4 Rationale of the Study ............................................................................................................................. 3
1.5 Objectives of the Study ........................................................................................................................... 4
1.5.1 General Objectives of the study ....................................................................................................... 4
1.5.2 Specific Objectives of the study....................................................................................................... 4
1.6 Scope of the Study .................................................................................................................................. 4
1.7 Methodology ........................................................................................................................................... 5
1.7.1 Sources of Information: ................................................................................................................... 5
1.7.1.1 Primary Source.......................................................................................................................... 5
1.7.1.2 Secondary Source...................................................................................................................... 5
1.7.2 Data Collection Tools and Techniques ............................................................................................ 5
1.7.3 Data Analysis Tools ......................................................................................................................... 5
1.8 Limitations of the Study.......................................................................................................................... 6
Chapter 2 ....................................................................................................................................................... 7
Literature Review.......................................................................................................................................... 7
Chapter 3 ..................................................................................................................................................... 12
An Overview of Bangladesh Development Bank (BDBL) ......................................................................... 12
3.1 An Overview of Bangladesh Development Bank Limited ................................................................... 13
3.2 Formation of BDBL .............................................................................................................................. 13
3.3 Corporate Profile ................................................................................................................................... 15
3.4 Organogram of BDBL .......................................................................................................................... 16
3.5 Mission Statement of the Bank ............................................................................................................. 17
3.6 Vision Statement of the Bank ............................................................................................................... 17
3.7 Strategy Priority .................................................................................................................................... 17
3.8 Core Values........................................................................................................................................... 18
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3.9 Number of Branches ............................................................................................................................. 18

3.10 Number of Employees ........................................................................................................................ 19
3.11 Products and Services of BDBL ......................................................................................................... 19
Chapter 4 ..................................................................................................................................................... 22
An Overview of Money Laundering ........................................................................................................... 22
4.1 Definition of Money Laundering .......................................................................................................... 23
4.2 A Brief History of Money Laundering ................................................................................................. 23
4.3 Summary of 40 Recommendations ....................................................................................................... 24
4.4 Stages of Money Laundering ................................................................................................................ 25
4.4.1 Placement stage .............................................................................................................................. 25
4.4.2 Layering Stage ............................................................................................................................... 25
4.4.3 Integration ...................................................................................................................................... 26
Chapter 5 ..................................................................................................................................................... 28
Means and Ways of Money Laundering ..................................................................................................... 28
5.1 Hawallah / Hundi / Chop ...................................................................................................................... 29
5.1.1 Elements of Hawallah System ....................................................................................................... 29
5.1.2 Actual Operation of This System ................................................................................................... 30
5.2 Over and Under Invoicing .................................................................................................................... 30
5.3 Cash Cultures ........................................................................................................................................ 31
5.4 Private Banking Relationships .............................................................................................................. 32
5.5 Electronic Banking................................................................................................................................ 32
5.6 Hundi Traders........................................................................................................................................ 32
Chapter 6 ..................................................................................................................................................... 34
Money Laundering Prevention of BDBL.................................................................................................... 34
6.1 Money Laundering Risk for BDBL ...................................................................................................... 35
6.2 Procedures Followed in BDBL to Combat Money Laundering............................................................ 35
6.2.1 Know Your Customer (KYC) Program ......................................................................................... 36
6.2.1.1 KYC Form .............................................................................................................................. 36
6.2.1.2 Risk Assessment ..................................................................................................................... 37
6.2.1.3 Periodic KYC Review for All Levels ..................................................................................... 37
6.2.2 Transaction Profiling (TP) ............................................................................................................. 37
6.2.3 Cash Transaction Report (CTR) .................................................................................................... 38
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6.2.4 Suspicious Transaction Report (STR)............................................................................................ 38

6.2.5 Online Banking .............................................................................................................................. 38
6.2.6 Wire Transfer: ................................................................................................................................ 38
6.3 Reporting Structure to Prevent Money Laundering and Terrorists Financing of BDBL ........................ 39
6.3.1 Responsibilities of Operation Officer in Branch ............................................................................ 40
6.3.2 Branch Anti Money Laundering Compliance Officer (BAMELCO) ............................................ 40
6.3.2.1 Responsibilities of BAMELCO .............................................................................................. 40
6.3.3 Members and Employees of Branch Management Department..................................................... 41
6.3.4 Deputy CAMELCO ....................................................................................................................... 42
6.3.5 Chief Anti Money Laundering Compliance Officer (CAMELCO) ............................................... 42
6.3.5.1 Responsibilities of CAMELCO .............................................................................................. 42
6.3.6 Central Compliance Unit (CCU).................................................................................................... 43
6.3.6.1 Authorities and Responsibilities of the CCU .......................................................................... 43
6.3.7 Chief Executive Officer / Managing Director................................................................................ 44
6.4 Reporting to GOAML ........................................................................................................................... 44
6.5 Reporting Flowchart Used by BDBL.................................................................................................... 45
6.6 Branch Rating Regarding Money Laundering ...................................................................................... 46
Chapter 7 ..................................................................................................................................................... 47
Recommendations and Conclusion ............................................................................................................. 47
7.1 Major Problems Found in BDBL to Prevent Money Laundering: ........................................................ 48
7.2 Recommendations: ................................................................................................................................ 48
7.3 Conclusion ............................................................................................................................................ 49
References ................................................................................................................................................... 50
Appendix ..................................................................................................................................................... 52

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List of Figures

Page No

Figure 2.1: Global Flows from Illicit Activities worldwide.16

Figure 3.1: Corporate profile of BDBL20
Figure 3.2 Total numbers of employees24
Figure 4.1: Stages of Money Laundering..32
Figure 6.1 Reporting Structure to Prevent Money Laundering.44
Figure 6.2: Procedure for using GOAML.49
Figure 6.3 Reporting Flowchart Used by BDBL..........................................................50
Figure 6.4 Branch rating chart51

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Abbreviation
AML =Anti Money Laundering
BAMLCO= Branch Anti Money Laundering Compliance officer
BFIU =Bangladesh Financial Intelligence Unit
BOD = Board of Directors
CAMLCO= Chief Anti Money Laundering Compliance officer
CCU = Central Compliance Unit
CEO = Chief Executive Officer
CFT = Combating Financing of Terrorism
CTR = Cash Transaction Report
FATF = Financial Action Task Force
FC = Foreign Currency
FIR = First Information Report
FIU = Financial Intelligence Unit
IT = Information Technology
ITP = Independent Testing Procedures
KYC = Know Your Customer
NCCT = Non Co-Operative Countries & Territories
NGO = Non-Government Organization
NPO = Non-Profit Organization
STR =Suspicious Transaction Report
TP = Transaction Profile
UCIC = Unique Customer Identification Code.
UNODC = United Nations Office on Drugs & Crime.

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Chapter 1
Introduction

1|Page

1.1 Title of the Study

The title of the study is on Money Laundering Prevention Measures: A Critical Study on BDBL.
This study has been conducted to expose the ways of money of laundering and what preventive
measures are adopted by BDBL to prevent it.

1.2 Background of the Study

In the recent years money laundering and terrorist financing become a burning issue among the
developed and developing nations. Worldwide, governments are recently spending a
considerable amount of their budgetary expenditure to protect the economy from the financial
criminals; as such crime is not only hampering the country itself, but also the other countries
around them. On the other hand, financial globalization makes it easier for the criminals to
transfer funds from one country to another, by avoiding the rule of financial transactions among
the countries. Initially the financial crime was the reason for socio-economic and financial
disruptions among the countries. More recently, (after 9/11) such activities fueling the terrorism
activities around the world for which countries, where financial crime occurred and where the
money transferred both have to take co-coordinated measure to protect their respective economy
from the terrorist. KPMG (2007) survey finds that money laundering flows by drug dealers, arms
traffickers and other criminals reported to be in excess of USD 1 trillion every year. Therefore,
combating money laundering and its related consequences, for example, terrorist financing
continues to be a major challenge for the local and international policy makers.
In this study it has been tried to identify the ways and means of money laundering and the roles
which are taken by Bangladesh Development Bank Ltd. (BDBL) because Money launderer use
diverse and innovative methods to conceal their criminal activities. Financial institutions are the
most widely used route to transfer illegal funds and convert those funds to legal identity. The
report starts with describing the methodology by which I have identified the ways and means of
money laundering and the roles which are taken by Bangladesh Development Bank Ltd.
(BDBL). Then the second part presents the analysis the existing literature on the topics. The 3rd
part describes the overall overview of BDBL and the next part describes the definition of money
laundering, money laundering act 2002, 2012 (Amended), the ways and means of money
laundering, the prevention steps, effects of money laundering and the challenges faced by the
financial institutions in developing countries like Bangladesh in combating money laundering.
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The final part presents some lackings in the existing anti-money laundering (AML) mechanism
among the financial institutions in Bangladesh and some recommendations are also there.

1.3 Origin of the Study

Todays business world is dynamic and competitive therefore organizations looking for talent,
extrovert graduates who belong to high degree of adaptability quality. Todays business
graduates will be the core part of business organization. So business graduates need to have both
theoretical & practical knowledge to manage the business activity properly. In order to be
familiar with organizational culture and to gain some practical knowledge about an organization
our Department of Management, University of Dhaka provides a 1.5 months internship program
as a part of the BBA program. After completion of the program period a student must submit the
report on the assigned topic to the Supervisor and the Department.
After the completion of four-year academic BBA program, Bangladesh Development Bank
Training Institute placed me in Bangladesh Development Bank Limited Bank (BDBL), Head
office, Rajuk Avenue, Dhaka for the internship program by on basis of the forwarding letter by
the Department of Management, University of Dhaka. The duration of my organizational
attachment was, by policy 36 working days, starting from January 13, 2016 to March 04, 2016.
As a requirement for the completion of the program this report is needed to submit which would
include an overview of the organization and specially the ways and means of money laundering
and what are the steps taken by Bangladesh Development Bank Ltd. (BDBL).

1.4 Rationale of the Study

Bangladesh Development Bank Training Institute placed me in Bangladesh Development Bank
Limited Bank (BDBL), Head office, Rajuk Avenue, Dhaka for the internship program by on
basis of the forwarding letter by the Department of Management, University of Dhaka. It
reminds me that BDBL is the prime development financing institution continued its effort to
make an effective contribution towards expansion of industrialization process of Bangladesh.
BDBL has already started the commercial banking and the bank is now drowned with foreign
exchange business. Because of commercial banking and foreign exchange, there is a huge chance
for money laundering. It seems to me that in BDBL there is a sufficient opportunity to gain
practical knowledge about money laundering as well as its overall performance, shortfall of
capital, loan agreement of the bank. The working environment is good and the employees are
3|Page

very much cooperative to provide practical knowledge about different functions of the bank.
Here I worked in several Departments that helped me a lot to gain some practical knowledge.
After completion of my 1.5 months Internship period in consulting with the supervisor of the
program a topic has been selected named Money Laundering Prevention Measures: A
Critical Study on BDBL

1.5 Objectives of the Study

1.5.1 General Objectives of the study
General objective is to gain the practical knowledge on money laundering and terrorist financing,
the range of activities and policies associated with banking sector, internal & external influential
factors for the product & procedures of the bank. This study will also give the opportunity to
relate our theoretical understanding with actual scenario & state my findings &
recommendations.

1.5.2 Specific Objectives of the study

The specific objectives are as follows:

To present an overview of Bangladesh Development Bank Limited (BDBL).

To understand various departmental activities and their key responsibilities.

To become familiar with organizational culture.

To find out problems and suggesting recommendations for further improvement.

1.6 Scope of the Study

The scope of the study was on the organization of Bangladesh Development Bank Limited
(BDBL). The study was confined only on the Head Office and gave more concentration on it.
Further emphasized on the prevention roles to combat money laundering, as it the main focused
area of the study.

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1.7 Methodology
1.7.1 Sources of Information:
1.7.1.1 Primary Source
The primary information have been collected by

Oral interviewing,

Practical deskwork,

Direct observation of the functions of BDBL

1.7.1.2 Secondary Source

The secondary information have been collected by

Annual report of the BDBL and BSRS,

Relevant papers/books and periodicals publication and

Manual of different departments

1.7.2 Data Collection Tools and Techniques

The main data is collected by observation and discussion because money laundering is long
process and it needs suspicious transaction. But the bank has rare suspicious transaction till now.
So this study has been completed on the basis of observation and discussion with AGM sir of
branch management department of BDBL.

1.7.3 Data Analysis Tools

No numeric data is used in this study. So there is no need to analyze the data. Microsoft office
2010 is used to complete this study.

5|Page

1.8 Limitations of the Study

There are some problems that may be termed as the limitations or shortcomings of the study.
Following limitations have faced during the study and the time of working & data collection:

A vast and critical topics has been selected like The ways and means of money
laundering and what are the steps taken by Bangladesh Development Bank Ltd. (BDBL)
but 1.5 months is not enough to focus each and every issue of Money Laundering (ML)
prevention elaborately.

No quantitative study for finding out the impact of the anti-Money Laundering initiatives
is done because of the absence of previous study or data.

The study has been carried out for the first time, so experience is one of the main
constraints of the study.

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Chapter 2
Literature Review

7|Page

The Bangladesh anti-money laundering act 2002 and anti-money laundering and terrorists
financing act 2012 (amended) define that Money Laundering means (a) Properties acquired or
earned directly or indirectly through illegal means; (b) Illegal transfer, conversion, concealment
of location or assistance in the above act of the properties acquired or earned directly or
indirectly through legal or illegal means.
Review of the literature discovered that money laundering is not a new phenomenon. The origins
of money laundering can be traced back to as early as 1930s in organized criminal activities
(Bosworth-Davies & Saltmarsh, 1994). However, after September 11, 2001, worldwide efforts to
combat money laundering and the financing of terrorism have become prime importance. The
FATF (Financial Action Task Force) has established an international standard against money
laundering and terrorist financing and produced recommendations that should be adopted. The
FATF measures are viewed as the leading international anti-money laundering standards that
provide an enhanced, comprehensive and consistent framework for combating money laundering
and terrorist financing. This framework serves as an international benchmark for national
governments to implement within their respective national jurisdictions, for the detection,
prevention and suppression of money laundering and the financing of terrorism.
Measuring the size and development of organized crime and/or money laundering is done by a
few researchers, only. One of the most well-known economists doing macro estimates of the size
and development of money laundering is John Walker (2007, 2004 and 1999). His model of
global money laundering is based on standard economic theory, in which he tries to develop an
international input-output-model. The Walker model relies on estimates of the extent of various
different types of crimes in single countries around the world, estimates of the proceeds resulting
from these crimes and the probability of those proceeds being laundered. Walker determines the
laundering pathways by an attractiveness index, which is based on a range of factors that
express the opportunities and risks presented by the financial sectors/institutions in each country.
He claims that his approach to quantify money laundering is arguably superior to those based on
analysis of financial transactions, since there is no potential for the double counting inherent in
the layering and placement stages of money laundering processes. The model defines the types
of data and analyses the need to be generated in order to effectively model global transnational
crime and money laundering.
8|Page

Walker (2007) concludes that since 2000 global money laundering may account for as much as
US$ 3 trillion and that business fraud exceeds illicit drugs as a source of laundered money. He
argues that attacking the economics of crime can be an effective transnational crime prevention
strategy and that economists can play a valuable role in monitoring and combating transnational
crime and money laundering. Peter Reuter (2007, 1983), who is quite critical to the findings of
John Walker, comes to the major conclusion that neither on the national nor on the global level,
credible estimates are available (Reuter (2007). He admits that the aggregate annual figure
globally is in the hundreds of billions of dollars, but whether that figure is a small number of
only a few hundred billions or even a trillion is unknown according to his research. He states that
the vagueness of such estimates is a result of both disagreements over how to conceptualize
money laundering, as well as weaknesses in the techniques used to quantify it. As a consequence
estimated changes in the volume of money laundering cannot be used as a measure to judge
effectiveness of global anti-money laundering regime. He concludes that aggregate figures
provide little value added for policy makers. He justifies his conclusion as follows: First, these
aggregate findings conceal as much as they reveal. Second, the anti-money laundering control
regime has been constructed not so much to reduce money laundering as to namely reduce
income producing crimes, increase the integrity of the financial system and control corruption
and terrorist financing. From this, he concludes that the volume of money laundry is more of a
scientific interest than a useful outcome for counter measures. Moreover, he comes to the result
that estimates of the underground economy are inherently weak in their own terms and even
weaker as estimates of the volume of money laundry because so little is known about what share
of proceeds, either legitimate or illegitimate, are processed in ways that are designed to conceal
the origins. The attempt to estimate total earnings from each major class of illegal crime
activities fails, because of a lack of systematic data systems for capturing the scale of each crime.
To summarize, Peter Reuter is very skeptical of the aggregate estimates and on any attempt to
estimate organized crime and money laundering, either for a single country or for the whole
world.
On the other hand, Brigitte Unger (2007, 2006), quite strongly defends the research of John
Walker, arguing that since the pioneer study of Walker (1994), it is possible to create a
framework to measure money laundering per country and worldwide. Furthermore, she argues
that Walkers model is a positive example for interdisciplinary work of criminology and
9|Page

economics. In her own work, Unger tries to justify the Walker model and tries to give a
theoretical underpinning of the Walker model by using Tinbergens old gravity model. The
gravity model principally says that the export flows from country to country depend on the GDP
of both exporting and importing countries and the distance between them. She applies this
approach to the Walker model; i.e. using the modern gravity approach, in which the
attractiveness to launder money depends among other factors on the bank secrecy in countries,
the government attitude against corruption and crime, etc. She admits that this model needs a
better micro foundation, but she clearly argues that the original Tinbergens ad-hoc formula was
later on progressively micro-founded. Hence, Brigitte Unger provides a first theoretical basis of
the Walker model applies it and shows that she can reach plausible estimates of money
laundering and organized crime8. Unger (Unger et al. (2006)) estimates the amount of money
laundering in the Netherlands from 18 to 25 billion Euro (year 2004/05), which is approximately
5% of the Dutch GDP. The report of Unger et al. (2006) presents a list of 25 effects of money
laundering on society, which are both positive and negative and have an effect in both the short
and long term. Unger et al. come to the conclusion, after identifying all effects and reviewing the
literature, that most literature on money laundering effects are pure speculation and furthermore,
one source refers to the other sources, without much empirical solid backup.
How much illicit money in all its forms can be observed? Baker (2007) estimates the illicit
money to range between US$ 1.0 and 1.6 trillion a year. This estimate has been adopted by the
World Bank. Moreover, Baker estimates that half US$ 500 to 800 a year comes out of
developing and transitional economies. These are countries that often have the weakest legal and
administrative structures, the largest criminal gangs of drug dealers, and, far too often, economic
and political elites who want to take their money out by any means possible. In table 2.1, the
global flows from illicit activities worldwide are shown. In cross-border illicit financial flows,
the proceeds of bribery and theft are the smallest, at only perhaps three percent of the global
total. Criminally generated funds account for some 30 to 35 percent of the global total.
Commercially tax evading money, driven in particular by abusive transfer pricing and faked
transactions as well as mispricing is by far the largest component, at some 60 to 65 percent of the
global total.

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Global Flows

Low (US$ bn)

High (US$ bn)

Drugs

120

11%

200

12.5%

Counterfeit goods

80

7.5%

120

7.5%

Counterfeit currency

0.2%

0.2%

Human trafficking

12

1.1%

15

0.9%

Illegal arms trade

2.0%

10

0.6%

Smuggling

60

5.6%

100

6.3%

Racketeering

50

4.7%

100

6.3%

Crime subtotal

331

31.2%

549

34.3%

Mispricing

200

18.9%

250

15.6%

Abusive transfer pricing

300

28.3%

500

31.2%

Fake transactions

200

18.9%

250

15.6%

Commercial subtotal

700

66.0%

1,000

62.5%

Corruption

30

2.8%

50

5.1%

Grand Total

1,061

100.0%

1,599

100.0%

(Source: Capitalisms Athilles Heel, Baker 2005. Based on a review of studies of transnational crime)

Figure 2.1: Global Flows from Illicit Activities worldwide, years 2000/2001
In his study, Dobovsek (2007) analyses that those criminal organizations have moved in the past
period to the economic sectors in order to strengthen economic power, but he is more and more
able to recognize that pressure is moving on state politic through their networks. His analysis
shows that persons committing organized crimes had moved into the second phase of
development of criminal organizations into the sphere of economy. According to Dobovsek, it
seems that they already have moved into a third phase movements into politics. In this kind of
meaning, the organized crime is appearing like the fifth branch of state authority, because it is
influencing with great amount of money, corruption, networking and extortion, on state economy
and policy and that is why Dobovsek suggests that one should closely analyze how organized
crime developed to find answers for the future.

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Chapter 3
An Overview of Bangladesh Development
Bank (BDBL)

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3.1 An Overview of Bangladesh Development Bank Limited

Bangladesh Development Bank Limited (BDBL) is fully state owned Bank of Bangladesh which
came to effective at 3rd January 2010. Bangladesh Shilpa Bank (BSB) and Bangladesh Shilpa Rin
Songstha (BSRS) were merged into Bangladesh Development Bank Ltd (BDBL) at 16th
November 2009 and come to effective at 3rd January 2010. In addition commercial banking,
BDBL provides financial and technical assistance to broaden the private as well as public sector
industrial base of the country. It prioritizes, especially, Export Oriented/Export Linkage
industrial units, Efficient Import Substitution, Joint Ventures, Commercialization of local
technology and promotion of agro-based industry. (http://www.bdbl.com.bd)

Logo of BDBL

3.2 Formation of BDBL

With the decision of the Government, Bangladesh Development Bank Ltd. (BDBL) was
incorporated on 16 November, 2009 as a Public Company Limited by shares under the
Companies Act, 1994 by amalgamation of former Bangladesh Shilpa Bank (BSB) and
Bangladesh Shilpa Rin Sangstha (BSRS), two Development Financial Institutions (DFIs) in the
public sector.
Bangladesh Shilpa Bank (BSB) was established on October 31, 1972 for accelerating the
industrial pace of the country through providing loan and equity to the industrial projects as per
Bangladesh Shilpa Bank Order, 1972 (Presidents Order No. 129 of 1972). With the same
objective, Bangladesh Shilpa Rin Sangstha (BSRS) was also established on October 31, 1972 as
per Bangladesh Shilpa Rin Sangstha Order, 1972 (Presidents Order No. 128 of 1972). In order
to carry on business of BDBL, Bangladesh Bank issued banking license on 19-11-2009.

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Two Vendors Agreements were signed between the Government of the Peoples Republic of
Bangladesh and the BDBL on 31 December, 2009 to acquire and take-over all of their (BSB &
BSRS) assets, benefits, rights, powers, authorities, privileges, liabilities, borrowings and
obligations and to carry on with the same business.
As a Public Limited Company, BDBL formally embarked its journey on January 03, 2010. It
extends financial assistance for setting up industries and provides all kinds of commercial
banking services to its customers through its branch network in Bangladesh.
The BDBL also inherited membership of Dhaka Stock Exchange Limited (DSE) and Chittagong
Stock Exchange Limited (CSE). In order to contribute to the capital market, it acts as stock
dealer and stock broker and operates brokerage houses, at Motijheel to provide services to the
small and medium investors. BDBL also established a fully owned subsidiary company namely
BDBL Securities Limited and transferred its one membership with DSE and another membership
with CSE. It acts stock dealer and stock broker and operates brokerage House At 12, Karwan
Bazar Dhaka to provide Investors. The BDBL is also managing a close-end Mutual Fund with
paid up capital of Tk. 5.00 crore. (http://www.bdbl.com.bd)

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3.3 Corporate Profile

(1) Name

: Bangladesh

Development

Bank

Limited

(BDBL)(Established through merger of former

BSB &BSRS)
(2) Registered Office

: BDBL Bhaban, 8, Rajuk Avenue, Dhaka-1000

(3) Legal Status

: Public Limited Company

(4) Date of Incorporation

: November 16, 2009

(5) Extent of Shareholding

: 100% share owned by the Government of

Bangladesh.

(6) Authorized Capital

: Tk.1000.00 crore

(7) Paid - Up Capital

: Tk. 400.00 crore

(8) Face Value Per Share

: Tk. 100.00

(9) Accounting Period

: January December

(10) Date of Business Commencement : November 16, 2009

Certificate
(11)

Banking

License

Issued

by : November 19, 2009

Bangladesh Bank
(14) Domestic Network

Number of Divisions in Head Office

: 11

Number of Departments in Head : 27

Office
Number of Zone Office

: 04

Number of Branch Offices

: 32

Number of Human Resource

: 878

(15) Membership of Stock Exchange

: Dhaka Stock Exchange

(21) Chairman

: Md. Yeasin Ali

(22) Managing Director

: Dr. Md. Zillur Rahman

(23) SWIFT Code

: BIC : BDDBBDDH

(24) Website

: www.bdbl.com.bd
Figure 3.1: Corporate profile of BDBL
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3.4 Organogram of BDBL

BOARD OF DIRECTORS

CHAIRMAN OFFICE

MANGING DIRECTOR
Vigilance Department

Board Division

Public Relation Dept.

Deputy Managing Director 1

Deputy Managing Director 2

Administration
Division

S M E & General
Advance Division

Finance & Accounts

Division

Investment Banking
Division

Legal Affairs &

Recovery Division

Information
Technology Division

Development
Banking Division

International
Banking Division

Branch Banking
Division

Internal Control &

Compliance
Division

Human Resource
Management Dept

S M E Dept.

Central Accounts
Dept.

Portfolio
Management Dept.

Loan Recovery
Dept.

MIS & Research

Dept.

Loan Operation
Dept.

International
Banking
Dept.

Branch Management

Audit & Inspection

Dept.

Pension & Welfare

Dept.

Mobile & Green

Banking Dept.

Reconciliation Dept.

Investment Banking
Dept.

Law Dept.

IT Operation Dept.

Treasury Dept.

Business
Development &
Mkt Dept.

Compliance Dept.

Real Estate Dept.

General Advances
Dept.

Budget Dept.

Debt Collection
Dept.

IT System Dept.

Risk Management
Dept.

Establishment &
Common Service
Dept.

Training Institute

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3.5 Mission Statement of the Bank

The missions of Bangladesh Development Banks Ltd. are as follows:
To be competitive with other Banks and Financial Institutions in rendering services;
To contribute to the countrys socio-economic development by identifying new and
profitable areas for investment;
To mobilize deposit for productive investment;
To expand branch network in commercially and geographically important places ;
To employ quality human resources and enhance their capability through motivation and
right type of training at home and abroad;
To delegate maximum authority ensuring proper accountability;
To maintain continuous improvement and up-gradation in business policies and
procedures;
To adopt and adapt to new technology;
To maximize profit by strong, efficient and prudent financial performance; and
To introduce new product lines according to market needs.
(http://www.bdbl.com.bd)

3.6 Vision Statement of the Bank

To emerge as the countrys prime Financial Institution for supporting private sector industrial
and other projects of great significance to the countrys economic development. Also be active
participant in commercial banking by introducing new lines of product and providing excellent
services to the customers. (http://www.bdbl.com.bd)

3.7 Strategy Priority

Invest in Eco friendly industries that help mitigate environmental degradation by
lending more for renewable energy, and effluent treatment plants and other projects that
employ energy efficient low-emission technologies including agro-based industries, small
power projects, and ICT, transport and infrastructure projects.
Select and invest industrial projects where locational advantages like local availability of
raw materials, good infrastructural facilities (road communication, transport facilities,
etc.) and utilities (power, gas, water, etc.) shall be available.
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 Limit project loan to Tk. 15 crore maximum and Tk.2 crore minimum (for large projects).
Arrange and participate in syndicated loan for projects above Tk. 15 crore.
Identify prospective and potential entrepreneurs and investors/ clients and motivate,
guide and help them select profitable industrial venture for investment.
Regularly publish financial disclosures.
Undertake from time to time SWOT (Strength, Weakness, Opportunity and Threats)
analysis for reviewing banks market position.

3.8 Core Values

Professionalism

Customer Focus

We are committed to provide the best of our We maintain strong customer focus and build
attention and ability for discharging our task, relationships

based

on

integrity,

trust,

roles and responsibilities and continually commitment, timely solution and mutual
upgrading our skill and knowledge base benefit to accelerate the growth.
keeping abreast with ongoing local and global
developments for attaining excellence in
banking businesses.
Transparency & Accountability

Corporate Social Responsibility

We are committed to remain transparent and We promote protection of the environment for
accountable to our stakeholders in discharging our children and are law-abiding in all that we
our responsibilities.

do.

3.9 Number of Branches

The total branches of Bangladesh Development Bank Ltd. are in number 37 including head
office and 4 zonal offices. Among 37 branches there are 25 urban branches and 7 are rural
branches. There are 5 Authorized Dealer (AD) branches also. The head office of BDBL consists
of 11 divisions and 27 departments. Branch management department is included with the Branch
banking division which controls all the branches of BDBL.

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3.10 Number of Employees

Human resource is the most important resource of any institution, more so for a bank, it is
nothing to say. As on December 31, 2014, the total human resource was 878. Among these,
officers working in different disciplines including staff position were mentioned below:
SL. No

Discipline

Numbers

01.

Accountants

01

02.

Lawyers

14

03.

Economists

49

04.

Engineers

43

05.

MBA / Financial Analysts

147

06.

Statisticians

19

07.

Senior Officers (IT)

20

08.

Others

391

09.

Staff

194
Total

878

(Annual report of BDBL 2014)

Figure 3.2: Total numbers of employees

3.11 Products and Services of BDBL

The Bank is always committed to serve the clients with the best values and innovative products
and services to enrich its portfolio. The products and services of BDBL are as follows:

(1) Developing Banking

i.

Industrial loan with emphasis on syndicated arrangement (Power & Energy,

Telecommunication, Fiber Optic Cable, etc.)

ii.

Public-Private
Communication

iii.

Partnership

(PPP)

project

(Port

Development,

Transport

&

like Road, Water & Air Ways etc.)

Small & Medium Enterprise (SME like IT Industries i.e. development of Hardware &
Software)

19 | P a g e

iv.

Agro-based ventures depending on indigenous raw materials (like Jute Twin / Yarn and
other Industries)

v.

Green Banking (Environment & Eco- Friendly industries like automatic brick kiln,
renewable energy, effluent treatment plant, etc.)

vi.

Lease Financing

(2) Commercial Banking Services & Solutions

(A) Deposit Banking:
i.

Current Deposit

ii.

Savings Deposit

iii.

Short Term Deposit

iv.

Fixed Deposit

v.

Deposit Pension Scheme

vi.

Other Special Savings Deposit:

Development Bank Sanchay Scheme (DBSS)
Shikkha Sanchay Scheme (SSS)
Chikitsha Sanchay Scheme (CSS)
Marriage Savings Scheme (MSS)
Investment Scheme at Retirement (ISR)
(Monthly Income Scheme (MIS)

(vii) Double Benefit Scheme (DBS)

(viii) Junior Savings Scheme
(ix) Green Savings Deposit
(x) BDBL Students Saving Account
(B) Short Term Loans:
i.

Cash Credit (Hypothecation)

ii.

Cash Credit (Pledge)

iii.

Secured Advances (General)

iv.

Secured Advances (Financial Obligation)

v.

Over Draft (OD)

vi.

Retail Banking
20 | P a g e

 Consumers Credit
Personal Loan

(3) Foreign Trade Financing & Foreign Exchange Business

(A) Foreign Trade Financing
i.

Export Cash Credit

ii.

Packing Credit

iii.

Purchase of Local & Foreign Documentary Bills

iv.

Payment against Documents (PAD)

v.

Loan against Imported Merchandise (LIM)

vi.

Loan against Trust Receipt (LTR)

(B) Foreign Exchange Business:

i.

Local L/C

ii.

Import L/C

iii.

Export Bill Collection

iv.

Back to Back L/C

v.

Foreign Remittance

vi.

Foreign Exchange Buy & Sale

(C) Other Banking Services:

i.

Demand Draft Issue

ii.

Payment Order Issue

iii.

Selling of Prize Bond

iv.

Selling of Savings Certificates, etc.

(4) Capital Market Operation

i.

Share / Securities Trading

ii.

Underwriting of Public Issues

iii.

Brokerage House Services

iv.

Mutual Fund Operation

v.

Bankers to the Public Issues

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Chapter 4
An Overview of Money Laundering

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4.1 Definition of Money Laundering

The simplest definition of Money Laundering is thatMoney Laundering is the process of converting cash, or other property that is derived from
illegal activity, so as to give it the appearance of having been obtained from a legitimate source.
Generally, the act of conversion and concealment is considered crucial to the laundering process.
It is important here to identify various illegal activities before actually going into a deep analysis.
Cash or Valuables that are derived or are proceeds of illegal activity include, drug production
and selling, smuggling, theft, blackmail, bribes, terrorism, tax evasion and any other crime
committed that results in financial gains.
(Guidance notes on prevention of money laundering)

4.2 A Brief History of Money Laundering

US gangster boss AI Capone was the initiator of Money Laundering. He earned a huge amount
of money through drug trafficking. Later he was arrested for tax evasion and stayed in the
Libyan prison. During 1920s he had some laundry firms those maintained accounts with banks.
With legal money he also put his illegally earned money in the bank to make his illegal money
legal. From then this term Money Laundering come into being.
It was also heard that Gangsters sometimes used their illegally earned notes to make soil and
later those unusable notes were put into the US Federal Reserve, in return, they get cash
certificates which was easily convertible in the banks. So the term Money Laundering was
justified from then.
Though this process of making dirty money clean, started long before but this term was used in
US newspapers in 1970s. In 1980s US mafia used pizza shop and jewelry parlor to laundry their
illegal money through banks. The main grounds of using this kind of business were- they are
very liquid in nature so no one can identify the actual income through this business.
In 2000 politically exposed persons also join in this group to make black money white so that
they can use it freely. In 2001 terrorist financing although only one aspect of Money
Laundering, has become a critical concern following the events of 11 September, 2001.

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The term "Money Laundering" is said to originate from Mafia ownership of Laundromats in the
United States. There Gangsters were earning huge cash from extortion, prostitution, gambling
and bootleg liquor. They needed to show a legitimate source for these monies.
The Act of "Money Laundering" was not invented until the Prohibition era in the United States,
but many techniques were developed and refined then. Many methods were devised to disguise
the origins of money generated by the sale of illegal alcoholic beverages. Following Al Capone's
1931 conviction for tax evasion, mobster Meyer Lansky transferred funds from home to accounts
overseas. After the 1934 Swiss Banking Act which created the principle of bank secrecy, Meyer
Lansky bought a Swiss bank where he would transfer his illegal funds through a complex system
of shell companies and offshore accounts.
The term "Money Laundering itself does not derive, as it often said from the story that Al
Capone used Laundromats to hide ill-gotten gains. It was Meyer Lansky who perfected Money
Laundering's older brother "capital flight", transferring his funds to Switzerland and other
offshore places. The first reference to the term "Money Laundering" itself actually appears
during the Watergate scandal (1973). US President Richard Nixon's "Committee to Re-elect the
President" moved illegal campaign contributions to Mexico, then brought the money back
through a company in Miami. It was Britain's Guardian newspaper that coined the term, referring
to the process as "Laundering."
(Money Laundering- A Brief History by Billy Steel)

4.3 Summary of 40 Recommendations

Criminalizing the laundering of the proceeds of serious crimes and enacting measures to
seize the proceeds of crime.

Requiring financial institutions to identify all clients, including any beneficial owners of
property, and to keep appropriate records.

Ensuring adequate systems for the control and supervision of financial institutions.

Establishing international treaties or agreements to pass national legislation that will

allow countries to provide prompt and effective international cooperation at all levels.

Requiring financial institutions to report suspicious transactions to the competent national

authorities and to implement a comprehensive range of internal control measures.
24 | P a g e

4.4 Stages of Money Laundering

There are 3 stages of money laundering. The stages are placement stage, layering stage and
integration stage.

4.4.1 Placement stage

This is the initial stage of Money Laundering where the funds from illegal activities are
introduced into the financial system. This is known as placement. Simply the funds are in
majority raw cash and the launderer wishes to place the funds into the financial system mainly
through the help of numbered bank account and if possible in different banks. The main intention
here is to get the dirty money across the counter. This stage usually involves:
Depositing the cash at a bank that is mingled with clean funds from legitimate business
sources to avoid suspicion. Then converting the cash to:
Purchase money market instruments, securities or fixed deposits. In the context of
Bangladesh maybe Sanchya Patras are purchased.
Readily recoverable debt
Breaking up one large amount of cash deposit into many smaller ones that can be
deposited over the counter without raising suspicion from the tellers end, a process
known as surfing.
Purchasing high value goods for personal use.

4.4.2 Layering Stage

The purpose of this stage is to make it more difficult to detect and uncover a laundering activity.
It is meant to make the trailing of illegal proceeds difficult for the law enforcement agencies.
Usually this is achieved by a wide variety of methods according to the opportunity given to, and
the ingenuity of the criminals and their advisors. Usually the stage involves:
Channel the fund through purchase or sale of investment instruments.
Resale of purchased goods/assets and the proceeds moved elsewhere.
Use of cash deposits as collateral security in support of legitimate transactions.
Wire the fund through a series of accounts at various banks across the globe or across
jurisdiction.

25 | P a g e

The idea of layering is to move the money around and thus disguise its illegal origins as far as
possible. This process of layering is mainly prevalent and more profound in countries where the
jurisdictions do not cooperate with anti-Money Laundering investigations or compliance is not
given due diligence. The financial institutions all over the world have been prompted to be aware
of this stage.

4.4.3 Integration
This is the third and the final stage of Money Laundering. In simple terms, during or at this stage
the laundered funds are reintroduced into the economy after successfully processing illegal
proceeds through the first two stages. At this level the illegally earned funds re-enter the
economy as legally earned funds without apparent connection to crimes committed. Methods
popular to money launderers at this stage of the game areThe sending of false export-import invoices overvaluing goods allows the launderer to
move money from one company and country to another with the invoices serving to
verify the origin of the monies placed with financial institutions.
A simpler method is to transfer the money via Electronic Fund Transfer (EFT) to a
legitimate bank from a bank owned by the launderers.
The placement and layering phases of Money Laundering have greatest impact on a developing
countrys financial institution. During these phases the illicit funds are being laundered but have
not yet been fully integrated into the economy for use by the launderer for consumption goods,
or as investments in legitimate businesses. Therefore it is important that during the first two
stages extreme caution is taken by the financial institutions.
The three basic steps may occur as separate and distinct phases. They may also occur
simultaneously or more commonly or may overlap. A quick summary of the three stages along
with example is provided in the table below:

26 | P a g e

Placement Stage
Cash

paid

into

(sometimes

with

complicity or
proceeds

of

Layering Stage

Integration Stage

bank Wire transfers abroad (often False

loan

repayments

or

staff using shell companies or funds forged invoices used as cover

mixed with disguised

as

proceeds

of for laundered money.

legitimate legitimate business).

business).
Cash deposited in overseas Complex web transfers (both
Cash exported.

banking system.

domestic and international)

makes tracing original source
of funds virtually impossible.

Cash used to buy high value Resale of goods/assets.

Income

from

goods, property or business

legitimate

assets.

appears "clean".

property

business

or

assets

Figure 4.1: Stages of Money Laundering

27 | P a g e

Chapter 5
Means and Ways of Money Laundering

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5.1 Hawallah / Hundi / Chop

One system that has been very difficult to investigate is the Asian and Chinese underground
banking systems. The system has names according to the country where it is operated. In
Chinese underground banking terms or the system is referred to as fei chien which means flying
money. In Hindi it referred to as the Hawallah/Hundi/Chop which means transfer related money.
In Arabic and Urdu it means trust. The Hawallah is based on the family using worldwide
network of ethnic Pakistani, Indian and Bangladeshi families providing efficiency and
confidentiality for those wishing to avoid conventional banking channels.

5.1.1 Elements of Hawallah System

The funds in this system are layered through a complex chain of wire transfers, gold smuggling
and invoice manipulation. They are then usually integrated into legitimate business or investment
in real estate. The major elements that allow the system to operate smoothly are described below.
Confidentiality
This is crucial between the client and the Hawallah dealer and a code of silence governs all
transactions with dire consequences attached to the breach of trust. If the code is broken, it is not
only puts his business in trouble but his life also.
Convenience
Hawallah dealers often operate in rural areas of underdeveloped countries where there are no
conventional banking services and the dealer fills this void. They offer the same services as
provided by the conventional banks such as cashier cheques, money orders and currency
exchange. Even where conventional banks exist it is not uncommon to have the Hawallah dealers
working as tellers.
Efficiency
Banking transactions through the normal banking channels especially in third world countries
can be slow and complex. The Hawallah systems can transfer large sums of money
internationally within hours with little or no paperwork and no physical movement.

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Cost Effectiveness
The economic incentive to use the Hawallah system rests upon the favorable exchange rate
movements and the low cost of Hawallah transactions. The exchange rate used in this system is
based on the Indian black market dollar price which is linked to the amount of gold being
smuggled into the country. Therefore the exchange rate offered is better than the official
exchange rates offered.
The Hawallah dealer provides better rates and charges lower commissions because he makes
additional profits through speculation in the money markets with the remitted funds and holds
those funds in interest bearing accounts prior to transfer.

5.1.2 Actual Operation of This System

A client who wishes to transfer funds in secret will go to the Hawallah dealer who will
agree to a commission and exchange rate and take the cash from the client. This cash
usually is in the currency of the clients home country. These funds are deposited locally
by the dealer being mixed with funds from the dealers legitimate business.
The client is given a chit. This may be half of a playing card or a banknote or a marked
scrap of paper.
The clients agent then goes to the Hawallah dealers opposite number in the country
where the funds are to be sent, the agent produces the chit and it is matched to the other
half by the Hawallah dealer. The funds less the commissions are then paid to the agent.
Hawallah dealers maintain constant reconciliation accounts with other dealers, balances being
settled by using Swiss bank accounts and inter-bank transfers again using the cover of legitimate
business. The dealers have and successfully operate legitimate businesses with substantial cash
flow and include travel agencies, carpet companies, gold dealerships, gem trading.

5.2 Over and Under Invoicing

In the terms of money laundering over and under invoicing is mostly related to the export-import
business. This is done by business people involved in international trade, who want to illegally
transfer their funds (earned lawfully or unlawfully) to foreign destinations. Reasons to undertake
such activity could be to evade tax or to avoid local legal scrutiny on illegally earned money.

30 | P a g e

Over invoicing is a money laundering tool which favors importers. To be able to use this
technique, the importer needs the help of his supplier abroad. Now, if he wants to transfer his
money abroad illegally to some country, known to be a tax-heaven, for example, he can simply
ask his supplier to show an invoice which will represent a sum excessive in value to the goods
actually imported. The importer on the other hand will send the mentioned amount, and the
supplier (having an unofficial understanding) will deposit the excess sum to the importers
foreign account.
Under invoicing on the other hand is favorable to exporters. And in this case the exporter will
seek help from his overseas client. If the client agrees, over exporting goods abroad he will show
an invoice that will represent an amount that is well below the price of actual goods exported.
The client on the other end will favor the exporter by sending the amount mentioned in the
invoice to the exporters country and the rest will be deposited to the exporters foreign bank
account, hence successfully conducting money laundering.

5.3 Cash Cultures

Bangladesh being a third world country comparatively takes a longer time to accept
technological advancement. This is especially true in the case of financial sector. Although there
has been much development in the financial sector (Cheques, ATM cards, Credit cards, online
banking) but still the majority of our population believe in the cash transaction when it comes to
business dealings.
People in Bangladesh take banking transactions as a hassle. This is due to the poor customer
service, long queue, and lack of banking knowledge. In addition to that there is the fear of the
given cheque being bounced back due to insufficient balance. Now if the beneficiary maintains
account in a different clearing region, it might take as long as one to two weeks for the fund to be
received at the designated account after going through different Clearing houses.
Hence to avoid this lengthy and complicated process (as perceived by the majority) Bangladeshis
prefer business transactions to be in cash and discard paper transactions as much as possible.
This so-called cash culture is acting as a great advantage to the money launderers. As most of the
business people are placing cash money over the counter from their business earnings, it is very
31 | P a g e

convenient for the money launderers to mingle their dirty earnings with their legitimate funds to
be put across the bank counter.

5.4 Private Banking Relationships

The term private banking generally means the personal or discreet offering of a wide variety of
financial services and products to the affluent market. In Bangladesh few of the multinational
banks like HSBC, Standard Chartered Bank these customers are referred to as Priority
Customers. These operations typically offer individual, commercial business, law firms,
investment advisors, trusts, and also personal investment companies may open private banking
accounts. Due diligence for private banking customers usually includes a more extensive process
than retail customers. It is critical to understand the clients source of wealth, needs, and expected
transactions.

5.5 Electronic Banking

This is also known as E-banking. The term possesses a wide area of operation. This could
include delivery of information, products, and services by electronic means (such as telephone
lines, personal computer, automated teller machine, and automated clearinghouse). Although in
Bangladesh we still have a long way to go in this field, but some of the multinational banks and
private local banks have already started E-banking and has a good prospect of expanding in this
segment of the market and the product offers will continue to grow at a rapid pace. Few of the Ebanking services include credit cards, loans, deposits, wire transfer, and bill paying services. This
medium of banking is vulnerable to money laundering because of its user anonymity, rapid
transaction speed, and its wide geographic availability.

5.6 Hundi Traders

The Hundi (Hawallah) trading system and its operation modality have been explained earlier and
this is a concept that is also present in Bangladesh. The system is a major tool for laundering
money in Bangladesh. By now it is clear that hundi is the most informal way of remitting money
from one country to another. It is very much illegal as the currencies being channeled into the
country do not reflect in the currency reserve of a nation. Hundi has a vast network worldwide. It
is done in a manner, where someone residing abroad gives the fund that needs to be remitted to
another country, Bangladesh for instance, to another person (a middle person) in exchange of
32 | P a g e

some charges (commissions). The middleman through his network will ask yet another person
(another middleman) to deliver the mentioned amount to its required destination. Both the
middlemen get some charges in return for undertaking this illegal transaction. In these types of
transactions, the money itself is not physically transferred. The middlemen pay the sum from
their own accounts and later get their own funds settled. This unregulated currency transaction
has a terrible effect on the economy, as it helps to devaluate the home currency.
Hundi is an old method and is a very effective one for the launderers as it has a massive network
around the world. For a country like Bangladesh this illegal transfer of foreign currency has
gained popularity (especially among the Bangladeshis wage earners residing abroad) due to its
competitive advantage against the drawbacks of our formal channels (or the financial
institutions). The local banks do not have global presence and similarly, the global banks do not
have a local presence. Therefore for a Bangladeshi wage earner, who are working abroad, to find
a foreign bank which is available there and also has branch down his village, is next to
impossible. And even if the chosen foreign bank has an alternative arrangement with a certain
local bank, it would definitely mean to do so at the cost of higher charges and in a longer time
span with limitations to the amount being transferred. To add more to that, 60% of the wage
earners residing abroad are not well educated and many of them are also residing there illegally.
This group of people actually has fear of going to any of the foreign banks. Especially the illegal
citizens are very keen to avoid any sort of formal or legal financial institutions to transfer their
money as these institutions would naturally require them to give detailed information for their
record keeping purposes. Moreover, the charges for remittances of both the local and the foreign
banks are also very high. Hence for a wage earner the ethical concern for the countrys Foreign
Currency Reserve consolidation will come secondary. To him his primary concern would be to
send money home (where it is most needed) in the fastest and cheapest most way.
The hundi traders are becoming ever so dynamic. It was quite interesting to know that they not
only deal with cash fund provided by their customers but also they grant money transfers on
credit. And nowadays the availability of telephones, cell phones, e-mail, fax, and etc. has made
the process more efficient and reliable. Nowadays remitters release money to the Hundi trader
after they have received acknowledgement over e-mails or phone calls from the beneficiary from
a distant location.
33 | P a g e

Chapter 6
Money Laundering Prevention of BDBL

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6.1 Money Laundering Risk for BDBL

The financial transactions in Bangladesh are still associated to a Cash Culture based society.
Payments through cheques, credit cards etc. are still not being treated as a reliable mode of
payments to businessmen due to some misappropriation by dishonest parties. Furthermore, the
clearing and collection process of cheques take relatively much more time due to the manual
process, as automated system is not yet available in Bangladesh as a whole. The unavailability of
global and local networks of banks, fear of wage earners in going to banks, delay and changes in
banking channel etc. have impact on hundi business, which is on the contrary appreciated by
some of the wage earners for remitting money. But as this money does not reflect our official
reserve, this unregulated cross border flow has tremendous effect on our national economy in
terms of trade imbalance, inflation, devaluation of currency etc. There are some trends of Under
and Over Invoicing in Trade Finance in the market. Besides, customers are in general very
reluctant and sometimes even not cooperative in providing adequate KYC information. Above
all, for the high level of corruption in the country, the risk of ML persists in Bangladesh
significantly.
However, the strict control monitored by the Bangladesh Bank through its guidelines for foreign
exchange transactions play a vital role in preventing ML across border, in addition to the ML Act
provisions. With the rapid growth in PFS (Personal Financial Services) and CMB (Commercial
Banking Business), the emphasis will remain in strict implementation of KYC discipline and
close monitoring of the existing Special Categories of Clients (SCC) to ensure a high quality of
client base for the Bank.

6.2 Procedures Followed in BDBL to Combat Money Laundering

BDBL identified the money laundering as one of its core risk areas and has been making all out
efforts to prevent money laundering. For mitigating the risk, the bank has a designated Chief
Anti-Money Laundering Compliance Officer (CAMLCO) at Central Compliance Unit under
Branch Management Department, Head Office, who has sufficient authority to implement and
enforce corporate wide AML policy, procedure and measure who is reporting directly to the
Senior Management and the Board of Directors. Moreover, every branch of this bank has a
designated Branch Anti-Money Laundering Compliance Officer (BAMLCO) under Branch Anti-

35 | P a g e

Money Laundering Compliance Unit, who independently reviews the transaction of accounts,
with verification of know Your Customer (KYC) and Suspicious Transaction Report (STR).
The Central Compliance Unit has also arranged Training/Workshop for developing awareness
and skill regarding AML activities of Executives and Officers of the bank and conducting
inspection regarding AML activities of the branch. Bank has established a manual for prevention
of money Laundering and issues circulars time to time giving specific guidelines in accordance
with Bangladesh Bank guidelines, regulations, Anti-Money Laundering Act, 2002 and AntiTerrorism Act, 2012. All the guidelines and circulars issued by Bangladesh Bank from time to
time are being strictly complied with by Central Compliance Unit and branches of the Bank.

6.2.1 Know Your Customer (KYC) Program

Know your Customer (KYC) is a risk based approach of BDBL with respect to profiling of
customers with a proactive anticipation of their propensity to launder money or conduct any
other illegal activity. The KYC program is a unique program practiced at BDBL. It involves the
necessity of the bank to get acquainted to the customers on a personal note to ensure that the
customers are not engaged in any suspicious activities that might affect smooth flow of the
banks operations.
An effective KYC procedure is fundamental part of any Anti-Money Laundering internal control
regime. They can reduce the risk of accounts being used for Money Laundering and can help
identify suspicious transactions. They can also protect the Bank against fraud and other
reputation risks.
6.2.1.1 KYC Form
KYC includes customer identification (evidence of identity and address), but, depending on the
risk associated with an account, it can also extend to more detailed due diligence about the
customer and their business. This page contains all necessary background information about the
client and even the clients source of wealth. If bank officials asked to a client, under new AML
rules and regulations, s/he has to show proof of wealth which is attached with the KYC. KYC is
an ongoing process and does not end when account opening procedures are completed. A typical
KYC form is attached in appendix.

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6.2.1.2 Risk Assessment

In the account opening form there is a part called risk assessment. In this part the customers are
categorized in three segments according to their occupation. The customers are categorized into
high, moderate and low risk level. Without the risk assessment no account can be open. It is done
by the account opening officer. Before opening an account the officer has to categorize the
customer one of this level.
6.2.1.3 Periodic KYC Review for All Levels
The KYC basically does the client profiling, i.e., obtain the client relevant background
information and document. As already mentioned the KYC process does not stop when the
account is opened. The information gathered on the customer is used periodically to evaluate the
appropriateness and reasonableness of the client transaction activity. The first and foremost
objective of the review is to keep the KYC information up to date. That is why KYC is an
ongoing process and KYC data must be amended when the customer notifies the bank of any
changes.
Secondly, this periodic review is to check that the activity on the account is consistent with
knowledge gained on the customer and an understanding of the nature of the transaction they do
and their business. This will ensure that the risk rating for the account remains correct.

6.2.2 Transaction Profiling (TP)

Another crucial requirement while complying with regulations regarding money laundering is
filling out the transaction profile. The transaction profile gives a general idea about the number
of transaction that a customer will conduct in a month. The form contains information such as:
Cash Deposit and Withdrawal per month along with expected volume.
Cheque Deposit and Withdrawal per month along with expected volume.
Demand Draft, Telegraphic Transfers and Payment Order per month along with
expected volume.
Inward and Outward Remittance per month along with expected volume.
Nature of Profession
Source of Funds

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All the above information gives a generic idea about the expected transactional activities in the
account. This is not say that all the information has to exact as mentioned, but it is also true that
when such inconsistency crops up (during the review) the transaction profile is subject revision
and subsequent upgrading.

6.2.3 Cash Transaction Report (CTR)

Every month BDBL has to send a report to the Central Compliance Unit, Head Office, which is
known as Cash Transaction Report (CTR). In this report, every cash transaction of the branch
has to be reported to the Central Compliance Unit, Head Office by using FIU reporting System
Software provided by Bangladesh Bank. Finally the Head Office sends the report to Anti-Money
Laundering Department of Bangladesh Bank.

6.2.4 Suspicious Transaction Report (STR)

It is another type of report which has to be sent to the BB. The transactions which amounts
started from 7, 00,001, are suspicious in nature to the bank authority, has to be reported to the
BB immediately through the Central Compliance Unit, Head Office. The BB then verifies and
judges the source of the transaction whether legal or illegal. If Bangladesh Bank founds anything
illegal, it takes necessary steps against the party.

6.2.5 Online Banking

The main medium of sending money is online banking. Most of the money is occurred through
online banking. To prevent money laundering, BDBL always aware of this and the bank does not
allow a large amount of money transaction if it permits the bank collects national id photocopy
from the senders.

6.2.6 Wire Transfer:

The message system of money transfer is known as wire transfer. In this system BDBL records
all the information about the transaction and collects all detail information of sender and
receiver. The bank needs careful observation and full information of the client if the transaction
cost exceeds USD $1000 and if it exceeds USD $25000 it needs full observation and need full
information of the client.

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6.3 Reporting Structure to Prevent Money Laundering and Terrorists

Financing of BDBL
Reporting structure of a bank is an organizational setup that deals with AML & CFT compliance
of the bank and the reporting procedure. This includes

Central Compliance Unit (CCU),

Chief Anti-Money Laundering Compliance Officer (CAMLCO),

Branch Anti-Money Laundering Compliance Officer (BAMLCO).

Operation
Officer in
branch
Branch Anti
Money
Laundering
Compliance
Officer
(BAMELCO)

Chief Anti
Money
Laundering
Compliance
Officer
(CAMELCO)

Chief
Executive
Officer (CEO)
Members and
employees of
branch
management
department

Deputy
CAMELCO

Deputy
CAMELCO

Figure 6.1 Reporting Structure to Prevent Money Laundering

This figure shows the prevention process of BDBL which start from the operation officer desk.
When client come to open an account the operation officer identify the person by KYC policy
and transaction profile. If any suspicion he sends a report to BAMALCO further decision.
BAMALCO may contact with CAMELCO and CAMELCO may contact with CCU for further
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investigation. If CCU think it is necessary it can inform the CEO and then CEO contact with
Bangladesh Bank for further investigation.

6.3.1 Responsibilities of Operation Officer in Branch

Be diligent regarding the identification (s) of account holder and the transactions relating
to the account
Complete the KYC Profile for the new customer
Ensure all required documentation is completed satisfactorily
Escalate any suspicion to the Supervisor, BAMLCO
Obtain documentary evidence of large cash deposits
Ongoing monitoring of customers KYC profile and transaction activity
Perform due diligence on prospective clients prior opening an account

6.3.2 Branch Anti Money Laundering Compliance Officer (BAMELCO)

BDBL has an experienced Branch Anti Money Laundering Compliance Officer (BAMLCO) in
every branch. The manager, the second man of the branch or a high official experienced in
general banking shall be nominated as the BAMLCO. The BAMLCO has to have detailed
knowledge in the existing acts, rules and regulations, BFIUs instructions and BDBL own
policies on preventing Money Laundering and Terrorist Financing. BAMELCO do 5 types of
work in branch
Identifying and reporting of Suspicious Transactions,
Know Your Customer,
Record keeping,
Training
Transaction monitoring,
6.3.2.1 Responsibilities of BAMELCO
For preventing ML, TF in the branch, the BAMLCO should perform the following
responsibilities:
Accumulate the training records of branch officials and take initiatives including
reporting to CCU, HR and training academy;
Compile self-assessment of the branch regularly and arrange quarterly meeting regularly;

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Ensure regular transaction monitoring to find out any unusual transaction (In case of an
automated bank, the bank should follow a triggering system against transaction profile or
other suitable threshold. In case of a traditional bank, transaction should be examined at
the end of day against transaction profile or other suitable threshold. Records of all
transaction monitoring should be kept in the file);
Ensure that all the employees of the branch are well aware and capable to identify any
unusual transaction or any attempt of unusual transaction;
Ensure that the KYC of all customers have done properly and for the new customer KYC
is being done properly;
Ensure that the UN Security Council and domestic sanction list checked properly before
opening of account and while making any international transaction;
Ensure the checking of UN sanction list before making any foreign transaction;
Keep information of dormant accounts and take proper measures so that any withdrawal
from these accounts shall not be allowed without compliance of BFIU's instruction;
Review cash transaction to find out any structuring;
Review of CTR to find out STR
Ensure all the required information and document are submitted properly to CCU and any freeze
order or stop payment order are implemented properly follow the media report on terrorism,
terrorist financing or other offences, like corruption, bribery, drug trafficking, gold smuggling,
human trafficking, kidnapping or other predicate offences and find out any relationship of the
branch with the involved person; if so the BAMLCO should make an STR.

6.3.3 Members and Employees of Branch Management Department

If BAMELCO finds any suspicious transaction he must make a Suspicious Transaction Report
(STR). Then it is send to the Members and employees of branch management department for
investigation. All the members and employees review the document and try to find out about the
information of the suspicious client. If any suspicious information comes out then they inform
the Deputy CAMELCO. Then the Deputy CAMELCO takes all the necessary steps.

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6.3.4 Deputy CAMELCO

In BDBL the head of branch management dept. is known as Deputy CAMELCO. If any
suspicious transaction and information is arisen regarding a client it is sent to the Deputy
CAMELCO for taking necessary steps and the Deputy CAMELCO analyzes all the information
that is collected by the employees of branch management and if all the information is right then
he signatures on it then send it to the CAMELCO for further investigation and necessary steps.

6.3.5 Chief Anti Money Laundering Compliance Officer (CAMELCO)

BDBL designates a Chief Anti Money Laundering Compliance Officer (CAMLCO) at its head
office who has sufficient authority to implement and enforce corporate wide AML and CFT
policies, procedures and measures and who will report directly to CEO or MD.CAMELCO
should not be below the 2 step below the MD or CEO. This provides evidence of senior
management's commitment to efforts to combat money laundering and terrorist financing and,
more importantly, provides added assurance that the officer will have sufficient influence to
enquire about potentially suspicious activities. The CAMLCO is responsible for oversight of the
banks compliance with the regulatory requirements on systems and controls against money
laundering and terrorist financing. The name of CAMELCO of BDBL is
MD. Syeedul Huq
DGM, Branch Management Department
Head office, BDBL Dhaka
6.3.5.1 Responsibilities of CAMELCO
CAMLCO must ensure overall AML&CFT compliance of the bank;
CAMLCO shall be liable to MD, CEO or BOD for proper functioning of CCU;
CAMLCO shall review and update ML & TF risk assessment of the bank;
Ensure that corrective actions have taken by the bank to address the deficiency
identified by the BFIU or BB.
Maintain the day-to-day operation of the banks AML&CFT compliance;
Oversee the submission of STR/SAR or any document or information to BFIU in
time;

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6.3.6 Central Compliance Unit (CCU)

The central compliance unit must be headed by a high official. The CCU shall issue instructions
for the branches, where transaction monitoring system, internal control system, policies and
techniques will be included to prevent Money Laundering and Terrorist Financing. The CCU
will report to BFIU without any delay in case of any account/business relationship found with
any person/entity whose name/names appeared to the mass media (TV/News Paper) regarding
ML, TF, PF or any predicate offences under MLPA, 2012. The CCU could also make a
Suspicious Transaction Report (STR) or Suspicious Activity report (SAR) directly to BFIU in
this regard.
The CCU of BDBL has been established in the head office and it consists of 5 officials. Among
them 2 officials are familiar with general banking and 1 is expert in information technology.
6.3.6.1 Authorities and Responsibilities of the CCU
CCU is the prime mover of BDBL for ensuring the compliance of AML & CFT measures. Its
main responsibilities are toCoordinate banks AML & CFT compliance initiatives;
Coordinate the ML & TF risk assessment of the bank and review thereon;
Develop banks policy, procedure and strategies in preventing ML, TF & PF;
Forward STR/SAR and CTR to BFIU in time and in proper manner;
Impart training, workshop, seminar related to AML & CFT for the employee of the bank;
Present the compliance status with recommendations before the CEO or MD on half
yearly basis;
Report summary of self-assessment and independent testing procedure to BFIU in time
and in proper manner;
Take required measures to submit information, report or documents in time.
For shouldering these responsibilities bank authority may consider to give the following
authority to CCU

Appointment of BAMLCO and assign their specific job responsibilities;

Requisition of human resources and logistic supports for CCU;

Make suggestion or administrative sanction for non-compliance by the employees.

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6.3.7 Chief Executive Officer / Managing Director

The Chief Executive Officer is engaged with the overall development of the bank. He declares
that the entire programs regarding Money Laundering prevention is strongly active and is
managed effectively and efficiently. The managing director of BDBL isDr. Md. Zillur Rahman
Managing director, BDBL

6.4 Reporting to GOAML

GOAML refers for global anti money laundering. It is a UNODC response to prevent money
laundering. It is an intelligence analysis system which is used by Bangladesh Financial
Intelligence Unit (BFIU) which is the central agency of Bangladesh responsible for analyzing
Suspicious Transaction Reports (STRs), Cash Transaction Reports (CTRs) and information
related to money laundering (ML)/financing of terrorism (TF) received from reporting
organizations and other sources and disseminating information/intelligence thereon to relevant
law enforcement agencies for further action. The GOAML Web application provides a secure
web based interface between the BFIU and its reporting organizations for the electronic upload
of reports such as XML files, filling out the online report forms or sending XML files as
attachments by secure e-mail, information sharing among stakeholders and other information.
BDBL officers follow some procedure for using GOAML. The Procedures are as follows:

User creation

Transactions
data entry

XML
generation

XML file
save and
print
Submit full
report to
Bangladesh
Bank

Figure 6.2: Procedure for using GOAML

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6.5 Reporting Flowchart Used by BDBL

Identify unusual
transaction

Evaluate by
BAMLCO

Findings

Is it
suspicious?

Yes

Arrange proper
documents and
Sent to CCU

No

Close with proper

records

Check the
sufficiency of
documents by CCU
Report to BFIU

Figure 6.3 Reporting Flowchart Used by BDBL

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6.6 Branch Rating Regarding Money Laundering

BDBL gives rating regarding money laundering on every branch by considering various aspects
of the bank. The rating system is given below:

Score

Rating

90 100

Strong

70 90

Satisfactory

55 70

Fair

40 - 55

Marginal

40 or below 40

Unsatisfactory
Figure 6.4 Branch rating chart

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Chapter 7
Recommendations and Conclusion

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7.1 Major Problems Found in BDBL to Prevent Money Laundering:

When this study is conducted in the branch management department, some problems are found
to prevent money laundering. These problems are found after a detailed observation and work in
branch management department in BDBL. The problems are as follows:
The bank doesnt have enough computer services and poor quality of internet
services.
Latest modern technology isnt available.
There is no Wi-Fi facility in the branch management department.
The post of DGM of branch management department is vacant for many days. For
this reason the speed of work is slow.
BDBL takes time to analyze the suspicious transitions about 3-4 days and reporting
time to Bangladesh Bank about 7-10 days. This is very long time to analyze the
suspicious transaction.
The rating regarding money laundering and terrorists financing that is given by
Bangladesh Bank is very poor. It is about 3.2 in the scale of 5.00.
There is no privacy in the branch management department and not enough skilled
employees to analyze the suspicious transaction.
Low speed of response among various departments and employees.
There is no fixed GOAML operator in branch management department and the bank
has few GOAML operators.
There is not enough training session for the branch management department.

7.2 Recommendations:
To prevent money laundering, Bangladesh Development Bank Ltd. (BDBL) has to follow the
rules and procedures that is provided by Bangladesh Bank and also remove the limitations that
the bank has. BDBL should take some necessary steps to solve the problems. The necessary
steps are as follows:
The bank has to ensure that it has enough computer services and has high speedy
stable internet facility.

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The privacy system must be implemented in branch management department as well

as all departments and it must ensure that it has enough skilled employees to analyze
the suspicious transaction.
The speed of response must be increased among the employees and various
departments.
The DGM post should never keep vacant. The bank has to ensure that all departments
have DGM.
The rating regarding money laundering and terrorists financing must be increased
from 3.2 to 5.00.
The bank should add 5 more officers in the branch management department.
The bank should ensure enough training session for the employees of the branch
management department.

7.3 Conclusion
All banks must follow global pattern by identify and report transactions of a suspicious nature to
the financial intelligence unit in Bangladesh Bank as well as train their staffs in anti-money
laundering and instruct them to report activities that they deem suspicious. Also, the installation
of anti-money laundering software that filters customer data, classifies it according to level of
suspicion and report anomalies. Such anomalies would include any sudden and substantial
increase in funds, a large withdrawal, or moment of cash to a bank secrecy jurisdiction.
From the foregoing, it is observed that money laundering has negative consequences on the
economy which include loss of revenue to the government, worsens criminal rate in the society,
and threatens the political stability and internal security of a nation. Hence, the need to check the
activities of the main channel of transporting this poisonous substances from passing through the
economy in order to avoid its contaminating effect in its effective functioning. The
understanding of the implication and the sincerity of government as well as the willingness of the
concern players in the industry to foster the growth of the economy in totality lead to the
formulation of various policy and procedures aimed at militating against such nefarious activities
without jeopardizing the primary interest of various stakeholders in the system.

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References
Alexander, K. (2001), The International Anti-Money Laundering Regime: The Role of the
Financial Action Task Force, Journal of Money Laundering Control, vol.4, n.3, pp.231-248.
Ali, A.S. 1998, A Gateway for money Laundering, Financial Liberalization in Developing and
Transnational Economics, Journal of Money laundering Control, Vol. 1, No. 4, April.
Annual report, 2014, Bangladesh Development Bank Ltd. Dhaka, Bangladesh
B. Steel, Billys Money Laundering Information Website. Money Laundering A Brief History.
http://www.laundryman.u-net.com/page1_hist.html, February 12, 2016.
Bangladesh Bank (BB), 2002, Instruction to be followed for compliance of the provisions
Contained in the Money Laundering Prevention Act-2002, 17 July 2002, Bangladesh Bank.
Becker, G. (1968), Crime and Punishment: an Economic Approach, Journal of Political
Economy, n.2, pp. 169-217.
Davis, K. (2003), Legislating against the Financing of Terrorism: Pitfalls and Prospects, Journal
of Financial Crime, vol. 10, n.3, pp.269- 274.
Duyne, P.C. van, Money-Laundering; Estimates in Fog, The Journal of Asset Protection and
Financial Crime, 1994 (19), 103142.
FATF report, 2005, Financial Action Task Force - Money Laundering and Terrorist Financing
Typologies 2004-2005, June 10, http://www.fatfgafi.org/dataoecd /16/8/35003256.pdf
FBI, 2001, Money Laundering, FBI Law Enforcement Bulletin, by William R. Schroeder, may,
Vol. 70, No 5, pp. 1-9.
Government of Bangladesh (GOB), 2002, Bangladesh Gazette on Money Laundering Prevention
Act-2002 on 7 April 2002.
Government of Bangladesh (GOB), 2007, Bangladesh Gazette on Money Laundering Prevention
(Amendment) Ordinance, 2007, 30 July, 2007.
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Jayasuriya D., (2003), Money Laundering and Terrorism Financing: The Role of Capital Market
Regulators, Journal of Financial Crime, vol. 10, n.1, pp.30-36.
John Walker Consulting Services. Modelling Global Money Laundering Flows. Website:
http://members.ozemail.com.au/~born1820/mlmethod.htm, November 30, 1998.
Johnson, J. (2001a), In Pursuit of Dirty Money: Identifying Weaknesses in the Global Financial
System, Journal of Money Laundering Control, vol.6, n.1, pp.122-132.
Lal, Bhure, 2003, Money Laundering: An Insight into the Dark World of Financial Frauds,
Siddharth Publications, Delhi, India.
Laundering, Institute for International Economics, Washington DC
Rahman, A. and Farjana, A. 2007, Anti Money Laundering Measures: Bangladesh Perspective,
The Cost and Management, Vol. 35, No.2, March- April, pp. 74-84.
Reuter, P. and E. M. Truman, 2004, Chasing Dirty Money -- The Fight against Money
Robert, L. and Paul, H. Accountants, Corruption, and Money Laundering. The CPA Journal,
June, 2003 Vol. LXXIII, No. 6.
Smetanka, J.A. 2000, Money Laundering in Bangladesh, a paper presented at a seminar
organized by Bangladesh Institute of Bank Management (BIBM) and American Express Bank on
March 11, 2000.
Takats, Elod. 2007. A Theory of "Crying Wolf": The Economics of Money laundering
Enforcement. IMF Working Paper, Western Hemisphere Department Washington: International
Monetary Fund.
Walker, J. and Unger, B. (2009), Measuring global money laundering: The Walker Gravity
Model, Review of Law & Economics, 5(2), 821-53.

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Appendix
KYC Form

Please fill this form in ENGLISH and in BLOCK LETTERS

IDENTITY DETAILS

Photograph

Name of the Applicant

Fathers / Husbands Name

a) Gender

Male
Female

Please affix your recent

passport size
photograph
Signature Across
photograph

Single
Married

b) Marital
status

Bangladeshi
Other
(Please specify,________________________)

a) Nationality

a) PAN

Specify the proof of identity submitted

c) Date of Birth

b) Status

Resident Individual
Non Resident
Foreign National

b) Unique Identification Number

(UID) / Aadhaar, if any
PAN card
Any other (Please specify; ________________________________________)

A. ADDRESS DETAILS

Correspondence Address

___________________________________________________
___________________________________________________
__
___________________________________________________
_
City/town/village

PIN Code

State

Country

Specify the proof of address submitted for correspondence

address

Contact Details

Tel. (Off.)

Tel. (Res.)

Fax No.

Mobile No.

Email ID

Permanent
Address
(If
different
from
above.
Mandatory for Non-Resident
Applicant to specify overseas

___________________________________________________
___________________________________________________
__
52 | P a g e

address)

___________________________________________________
_
City/town/village

PIN Code

State

Country

Specify the proof of address submitted for permanent address

B. OTHER DETAILS
1

Gross Annual Income Details (please specify):

Income Range per annum

Networth

Below ` 1 lac

Amount (`) _________________________

` 1- 5 lac

OR

` 5- 10 lac

As on (date)

` 10- 25 lac
More than ` 25 lac

(Networth should not be older than 1 year)

Occupation (please tick any one and give brief details): ________________________________________________________

Private Sector

Agriculturist

Public Sector

Retired

Government Service

Housewife

Business

Student

Professional

Others (Please specify; ______________________________________________)

Please tick, if applicable:

Any other information

Politically Exposed Person (PEP)

Related to a Politically Exposed Person (PEP)

C. DECLARATION
I hereby declare that the details furnished above are true and correct to the best of my knowledge and belief and I undertake to
inform you of any changes therein, immediately. In case any of the above information is found to be false or untrue or misleading
or misrepresenting, I am aware that I may be held liable for it.

Signature of the Applicant

_______________________________________

Date

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