Myanmar added to FATF blacklist

Myanmar News Alert | October 2022

Myanmar added to FATF blacklist

Dear Readers,

On 21 October 2021, the Financial Action Task Force (“FATF”) announced Myanmar’s addition to its category of “high-risk jurisdictions
subject to a call for action”, commonly known as the “blacklist”. FATF cited Myanmar’s persistent failure to combat money laundering
and terrorist financing. As a consequence, countries and financial institutions are advised to apply enhanced due diligence to business
relations and transactions with Myanmar.

It should be noted that Myanmar has in the past already been blacklisted from 2001 to 2006, and again from 2011 until February 2016,
when it was moved to the “increased monitor list”, also referred to as the “grey-list”, and subsequently delisted in June 2016 in
acknowledgment of the progress made on criminalizing terrorism financing.

In February 2020, Myanmar was added back to the grey-list of “jurisdictions actively monitored”. While this designation did not result
in any immediate recommendation for action, the FATF urged the application of a risk-based approach with regard to Myanmar-related
transactions.

As a consequence, and particularly following the political events that took place in the country since February 2021, many international
financial institutions have already introduced additional customer due diligence measures for Myanmar-related transactions, which are
often similar to the enhanced due diligence measures recommended for blacklisted countries.

Please find below a brief overview of the consequences of the recent FATF statement.

I. Background II. No counter-measure to be taken

The FAFT is a Paris-based intergovernmental body Notably, the FATF did not call upon its members to take counter-
established by the G-7 nations in 1989 and proclaims itself as measures against Myanmar (as they did in the case of Iran and
a “global money laundering and terrorist financing watchdog,” North-Korea).
which helps to coordinate efforts “to prevent organization
crime, corruption, and terrorism”. The FAFT currently III. Enhanced Due Diligence vs. Risk-
comprises 37 member jurisdictions and two regional Based Approach
organizations.
In the recent statement, the FAFT has urged its members and all
In its recent statement, the FATF has recommended that other jurisdictions to apply enhanced due diligence to business
Myanmar be blacklisted immediately. The blacklisting urges relations and transactions with Myanmar.
countries to oblige its financial institutions to apply enhanced
due diligence for transactions that involve Myanmar entities or This does not mean that transactions with Myanmar should be
citizens. As FATF is not a supranational legislator or stopped completely. According to section 20 of the FAFT
supervisory-body for financial institutions, this is merely a non- Interpretive Note to Recommendation 10, enhanced due
binding recommendation to members and other jurisdictions to diligence measures mean that financial institutions should
act. examine, as far as reasonably possible, the background and
purpose of all complex, unusual and large transactions and all
Since Myanmar has historically been a country of concern and unusual patterns of transactions, which have no apparent
was just recently grey-listed, many international financial economic or lawful purpose.
institutions have already implemented similar additional
customer due diligence measures for transactions that Where the risk of money laundering or terrorist financing is
involves Myanmar entities or citizens. higher, financial institutions shall conduct enhanced customer
due diligence measures, consistent with the risks identified.
Comment Luther: In various jurisdictions, such as the
European Union, guidelines on enhanced due diligence In particular, they should increase the degree and nature of the
measures have already been applicable for Myanmar since monitoring of business relationships to determine whether
its grey-listing in 2020. In those jurisdictions, no new transactions or activities appear unusual or suspicious.
instructions are to be expected.

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 Myanmar added to FATF blacklist

Examples of enhanced customer due diligence measures that IV. Remittances

may be applied for higher-risk business relationships include:
In its statement, the FATF highlighted that “when applying
▪ Obtaining additional information on the customer (e.g.
enhanced due diligence measures, countries should ensure that
occupation, volume of assets, information available
flows of funds for humanitarian assistance, legitimate NPO
through public databases, internet, etc.), and updating
activities and remittances are not disrupted.”
the identification data of the customer and beneficial
owner more regularly; This is to be understood as a general encouragement to ensure
▪ Obtaining additional information on the nature of a that any remittances to and from Myanmar remain possible, not
business relationship; limited to humanitarian aid.

▪ Obtaining information on the source of funds or source of Whether and how financial institutions will ensure that
wealth of the customer; remittances are not further disrupted remains to be seen.

▪ Obtaining information on the reasons for intended or V. Humanitarian Aid

performed transactions;
▪ Obtaining the approval of senior management to
The same holds true for humanitarian aid and non-profit
activities.
commence or continue the business relationship;
▪ Conducting enhanced monitoring of the business Considering the non-binging nature of the FATF statement, this
relationship, by increasing the number and timing of can be understood as a recommendation to exempt
controls applied, and selecting patterns of transactions humanitarian, non-profit and charitable activities from the
that need further examination; and enhanced due diligence requirements, or at least ensure that
such measures do not disrupt the funding of such activities.
▪ Requiring the first payment to be carried out through an
account in the customer’s name with a bank subject to Ultimately, it will however be the national legislators and
similar customer due diligence standards. respectively the financial institutions who decide on the practical
implementation of these measures.
Similar customer due diligence measures are also
recommended under the risk-based approach, which applies VI. Other impacts
to grey-listed countries.
Enhanced due diligence measures for Myanmar companies and
According to the official FAFT guidelines on risk-based citizens will not be limited to the financial sector, but may also be
approach for the banking sector, customer due diligence under applied by other agencies and regulated industries tasked with
the risk-based approach comprises: the prevention of money laundering and terrorist financing.

▪ Identifying the customer and, where applicable, the For example, the Accounting and Corporate Regulatory Authority
customer’s beneficial owner; of Singapore (ACRA) advised all “registered filing agents” to
“take appropriate measures to manage any risks arising from on-
▪ Verifying the customer’s identity on the basis of reliable
going and new business activities and customer relationships”.
and independent information, data or documentation to
at least the extent required by the applicable legal and VII. Conclusion
regulatory framework;
Please note that Myanmar’s blacklisting as well as the enhanced
▪ Understanding the purpose and intended nature of the
due diligence measures are only recommendations. It is the
business relationship and, in higher risk situations,
FATF members and/or non-members who are tasked to
obtaining further information (e.g., information on
determine Myanmar-related due diligence requirements and
sources of funds); and
oblige their financial institutions and other agencies with the
▪ Ensure compliance with national and international implementation.
sanctions legislation by screening the customer’s and
beneficial owner’s names against the UN and other Considering that most international financial institutions have
relevant sanctions lists. already increased their customer due diligence measures for
Myanmar following its grey-listing and the recent political events,
Comment Luther: Based on our experience, most financial it remains to be seen to what extent, if any, the recent blacklisting
institutions have already implemented the central customer will affect the current framework for bank transfers into and out
due diligence measures recommended for higher-risk of Myanmar.
business relationships with respect to their Myanmar While financial institutions with few Myanmar-related
business.. transactions may take a more strict approach, countries and
It thus remains to be seen to what extent, if any, financial institutions with enhanced business interests in
Myanmar are likely to seek a balance between additional due
international financial institutions will further increase their
diligence requirements and business interests.
current customer due diligence framework or introduce
additional scrutiny-layers.

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 Myanmar added to FATF blacklist

VIII. Our services

Our team in Yangon would be happy to assist you in ensuring
full compliance with the statutory obligations applicable to your
business in Myanmar, including legal and tax advice, as well
as accounting, payroll, corporate secretarial and tax
compliance services.

Should you have any questions or require further information,

please do not hesitate to contact us.

Stay safe and best regards,

Luther Law Firm Limited

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 Myanmar added to FATF blacklist

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Active in Myanmar since 2013, Luther is one of the largest law Our local and international colleagues have the necessary
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We devise and help our clients to implement legal, tax and Chamber of Commerce in Myanmar, the German Myanmar
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Awards

“The Legal 500 Asia-Pacific 2021“ ranked In 2022, both Luther Myanmar and Alexander
Luther Myanmar in Band 3 and shortlisted the Bohusch individually were ranked in Band 3 by
firm as Law Firm of the Year - Myanmar Chambers Asia Pacific.

SOUTHEAST ASIA CHAMBERS

AWARDS 2022
2020 / 21

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Tax advisory and business process outsourcing services

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and registers – Recording of all commercial tax (CT) on taxable
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