Sheltech Brokerage Limited

Prevention of Money Laundering &

Combating Terrorist Financing
Guidelines

Approva
l
By the Board
in the
_____

Company
Secretary

Board Meeting

Contents

1. Overview of the
Guidelines..............................................
...............................................................
...............................................................
.....

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2. Prevention of Money Laundering
Policy....................................................
...............................................................
.........................................

a)

b)

c)

d)
e)
f)
g)
h)
i)
j)
k)
l)

Purpose ..................................................
................................................................
................................................................
............................
Definitions...............................................
................................................................
................................................................
............................
Reasons for Combating Money
Laundering..............................................
................................................................
.........................................
Process of Money
Laundering..............................................
................................................................
...............................................................
Predicate
Offence...................................................................................................................................................................
...........................
Reporting
Organization...........................................................................................................................................................
...........................
Offence and
Penalties.................................................................................................................................................................
.......................
Power and Responsibilities of Bangladesh
Bank.................................................................................................................................................
Responsibilities of Sheltech Brokerage Limited
(SBL).........................................................................................................................................
Responsibility
Assignment............................................................................................................................................................
.....................
CAMLCO and Central Compliance Committee
(CCC): ........................................................................................................................................
BAMLCO .................................................................................................................................................................
............................................

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7
7
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9
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Money Laundering Prevention

m) Training....................................................................................................................................................
Client Identification &
Verification.............................................................................................................................................................
n) ........
Politically Exposed Persons
o) (PEPs)...............................................................................................................................................................
Sanction
Policy......................................................................................................................................................................
p) .............................
Prevention of Money
Laundering...........................................................................................................................................................
q) .....
Transaction
Monitoring..............................................................................................................................................................
r) .......................
Recognition and Reporting of Suspicious Transactions
s) (STR).......................................................................................................................
Record
Keeping.................................................................................................................................................................
t) ...........................
3. Policy on Combating Financing
of
Terrorism..............................................
.................................................................
..........................................
a) Purpose .................................................................................................................................................................
.............................................
b) Senior Management
Commitment.........................................................................................................................................................
.....
c) Terrorist
Financing..............................................................................................................................................................
.........................
d)
Sources of Terrorist
Financing................................................
...............................................................
......................................................
e) Link between money laundering and terrorism
financing..........................................................................................................................
f) Reasons for combating financing of
terrorism............................................................................................................................................
g) Responsibility and Authority of Bangladesh
Bank.......................................................................................................................................
h) Responsibilities of Sheltech Brokerage Limited
(SBL).................................................................................................................................

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10
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11
11
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13

14
14
14
15
15

16
16
17
17

i) Offence and
Penalties

17
j) Client Identification Procedures with Due
Diligence..

18

k) Powers of Attorney/Nominee/Mandates to Operate

Accounts 21
3

l) Politically Exposed Persons (PEP)

. 21
m) Prevention of Terrorist
Financing.
22
n) Sanction
Policy
.. 23
o) Suspicion
Indicators
.. 24
p) Recognition and Reporting of Suspicious Transactions (STR)
.. 26
q) Record
Keeping
26
r)
Training
26
4. Know Your Client (KYC)
Policy
27
a)
Purpose
.. 27
b) General
Provision
27
c)
Purpose
. 27
d) Policy and
Procedure
.. 27
e) Guideline
Principle
. 28
f) Know Your Client (KYC)
Guideline
28
g) Who is a
Client.............................................................................................................................
.......
28
h) Client Acceptance
Policy
.
28
i) Client
Identification

29
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j) Politically Exposed Persons (PEP)

32

k) On-going
Monitoring
..
32
l) Risk
management
.. 33

1. Overview of the Guidelines

Under Section 2(L) of the Money Laundering Prevention Act 2009, Stock Brokers
have been included as Reporting Organizations by the AML Circular No. 26
issued on 30 September 2010. Stock Broker have further been included in
Section 2(W) (VII) of the Money Laundering Prevention (MLP) Act 2012.
In recognition of the fact that capital market institutions are particularly
vulnerable to be used by money launderers, the Board of Sheltech Brokerage
Limited (SBL) intends to have an effective policy and procedures to counter
money laundering, prevent terrorist financing and to formulate a robust Know
Your Client (KYC) policy. This guideline is divided into three major sections
which will cover all of the above mentioned areas namely:

Prevention of Money Laundering Policy

Combating Terrorist Financing Guidelines
Know Your Client (KYC) Policy

The entire guideline complies with all requirements of the Money Laundering
Prevention Act 2012 and related circulars and guidance issued by the Anti
Money Laundering/Bangladesh Financial Intelligence Unit Department. This
guideline will cover the requirements of the Guidance Notes on Prevention of
Money Laundering of Bangladesh Bank where relevant.
General Provisions
This guideline will become effective upon approval by the Board of Directors. All
employees of Sheltech Brokerage Limited (SBL) need to comply with the policy
and all relevant employees must be thoroughly familiar with and make use of
the material contained in the guidelines.
The guidelines will be kept updated by the Risk Management & Compliance
Department of the Brokerage House and any change in the AML/CFT regulations
by regulators will be reflected accordingly.

2. Prevention of Money Laundering Policy

a) Purpose
The purpose of this policy is to provide a guideline in order to ensure the
compliance of laws and regulations regarding Money Laundering in both
nationally and globally and thereby ensuring adequate safeguards are in place
at the merchant bank from potential compliance, financial and reputation risk.
b) Definitions

Money Laundering:
-

The fundamental concept of Money laundering is the process by

which proceeds from a criminal activity are disguised to conceal
their illicit origins.

Money Laundering as per the UN Convention:

-

The conversion or transfer of property, knowing that such property is

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derived from any offense, e.g. drug trafficking, or offenses or from an act
of participation in such offense or offenses, for the purpose of concealing
or disguising the illicit origin of the property or of assisting any person
who is involved in the commission of such an offense or offenses to
evade the legal consequences of his actions;
The concealing or disguising of the true nature, source, location,
disposition, movement, rights with respect to, or ownership of property,
knowing that such property is derived from an offense or offenses or from
an act of participation in such an offense or offenses, and;
The acquisition, possession or use of property, knowing at the time of
receipt that such property was derived from an offense or offenses or
from an act of participation in such offense or offenses.

Money Laundering as per Section 2 of the Money Laundering Prevention Act

2012:
-

Knowingly move, convert, or transfer proceeds of crime or property

involved in an offence for the following purposes:
i.

concealing or disguising the illicit origin/nature, source, location,

ownership or control of the proceeds of crime; or
ii. assisting any person for evading the legal consequences of his or her
action who is involved in the commission of the predicate offence.
-

Smuggle funds or property abroad earned through legal or illegal means.

-

Knowingly transfer or remit the proceeds of crime into or out of

Bangladesh with the intention of hiding or disguising its illegal
source.

Collude or attempting to collude financial transactions in such a manner

as to avoid reporting requirement under this Act.

Conversion or movement or transfer of property with the intention to

instigate or assist the carrying out of a predicate offence.
-

Acquire, possess or use property, knowing that such

property is the proceeds of a predicate offence.

Perform such activities so that the illegal source of the proceeds of crime
may be concealed or disguised.

Participate in, associate with, conspire to commit, attempt to commit or

abet, instigate or counsel to commit any offences mentioned above.

c) Reasons for Combating Money Laundering

The effects and impact of money laundering on social and economic aspects of
life is rampant and visible in todays world. A few major reasons to combat
money laundering are:

Money laundering has potentially devastating economic, security, and social

consequences and is a process to making crime worthwhile, providing the
fuel for drug dealers, smugglers, terrorists, illegal arms dealers, corrupt
public officials, and others to operate and expand their criminal enterprises.

Money laundering diminishes government tax revenue and therefore

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indirectly harms honest taxpayers. It also makes government tax collection

more difficult.

Money laundering distorts asset and commodity prices and leads to

misallocation of resources. For capital market institutions it can lead to an
unstable liability base and to unsound asset structures thereby creating
risks of monetary instability and even systemic crises.

Among its other negative socioeconomic effects, money laundering

transfers economic power from the market, government, and citizens to
criminals. Furthermore, the sheer magnitude of the economic power that
accrues to criminals from money laundering has a corrupting effect on all
elements of society.

d) Process of Money Laundering

There is no single method of laundering money. Methods can range from the
purchase and resale of a luxury item (e.g. a house, car or jewellery) to passing
money through a complex international web of legitimate businesses and 'shell'
companies (i.e. those companies that primarily exist only as named legal
entities without any trading or business activities). There are a number of
crimes where the initial proceeds usually take the form of cash that needs to
enter the financial system by some means.
Usually money laundering is achieved in 3 basic stages which may comprise of
numerous transactions by the launderers. This process begins after the
predicate offences are committed and funds have been generated. Primary
objective of launderers are to clean their dirty money. The stages are:
i.

Placement at this initial stage, illegal funds or assets are first brought into
the financial system. This placement makes the funds more liquid. For
example, if cash can be used to buy shares in the secondary capital
markets, it becomes easier to transfer and manipulate.

ii. Layering this process separates the proceeds of criminal activity from their
source through the use of layers of financial transactions such as multiple
transfers of funds among financial institutions and the ultimate investment
in the capital markets through proper banking channels to disguise the
origin of the funds and disrupt any audit trail. Launderers usually want to
move funds around and constantly change their form and location. Capital
markets are one of the primary choices of launderers due to its readily liquid
nature and ease of transactions.
iii. Integration once funds are layered and distanced from their origin, they
are made available to criminals to use and control as apparently legitimate
funds called integration. Such funds are made available for further
criminal activities or to promote their lifestyles.
e) Predicate Offence
Any related offence as decided by Bangladesh Bank with the approval of the
government serving the purpose of the MLP Act 2012.
f) Reporting Organization
These are organizations as declared by Bangladesh Bank with the approval of
the government by notification in official gazette from time to time.
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g) Offence and Penalties

Failure to comply with the MLP 2012 and associated Bangladesh Bank
regulations may result in severe criminal and civil penalties against SBL.
Criminal and civil penalties include imprisonment, substantial fines and even
possible loss of business licenses. Employees may also be subject to
disciplinary action by the company up to and including termination of
employment for participating in such activities.
The following are offences related to Money Laundering:

Conceal, convert or transfer proceeds of criminal activity.

Helping somebody else to launder their money or handling the proceeds of
crime.
Structuring and attempting to conduct a financial transaction with an
intention to avoid reporting requirements under the MLP 2012.
Concealing or transferring clean money illegally.
Failure to report knowledge or suspicion of money laundering.
Violation of legal seizure and freeze orders.
Tipping off.
Obstruction of investigations.
Providing false information on identity and source of funds of an Account
Holder and providing false information about nominee or beneficiary of an
Account knowingly.

All offences under this MLP 2012 are non-bail-able, cognizable and non
compound-able. Trials under this act will be conducted by a Special Judge
appointed as per Section 3 of Criminal Law (Amendment) Act 1958.
Courts will not accept any offence under this act for trial unless a complaint is
lodged by the Anti Corruption Commission or their authorized law enforcement
agencies.

h) Power and Responsibilities of Bangladesh Bank

The Money Laundering Prevention Act 2012 gives Bangladesh Bank a broad
responsibility for prevention of money laundering and wide-ranging powers to
take adequate measures to prevent money laundering. While all such powers
are prescribed in the Act, a few major powers are:

To analyze or review information related to cash transactions and suspicious

transactions received from any reporting organization and to collect
additional information relating thereto for the purpose of analyzing or
reviewing from the reporting organizations and maintain data on the same
and, as the case may be, provide with the said information to the relevant
law enforcement agencies for taking necessary actions.

To ask for any information or obtain a report from reporting

organizations with regard to any transaction in which there are
reasonable grounds to believe that the transaction is involved in
money laundering or a predicate offence.

To issue an order to any reporting organization to suspend or freeze

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transactions of any account for a period not exceeding 30 (thirty) days if

there are reasonable grounds to suspect that any money or property has
been deposited into the account by committing any offence. Provided that
such order may be extended for additional period of a maximum of 6 (six)
months by 30 (thirty) days, if it appears necessary to find out correct
information relating to transactions of the account.

To issue, from time to time, any direction necessary for the prevention of
money laundering to the reporting organizations.

To monitor whether the reporting organizations have properly submitted

information and reports requested by Bangladesh Bank and whether they
have duly complied with the directions issued by it, and where necessary,
carry out on-site inspections of the reporting organizations to ascertain the
same.

i) Responsibilities of Sheltech Brokerage Limited (SBL)

Sheltech Brokerage Limited must ensure the following:

Retain clients correct and complete information while maintaining portfolio

account relationship, issue management relationships and any other revenue
generating relationships.
Retain records of transactions of a client for 5 years from the date of
closure of the relationship.
The company and its employees must always remain conscious and alert to
detect unusual/suspicious transactions as per Section 2(Z) of the MLP 2012
in their day to day activities. Any suspicious transaction has to be reported
to the General Manager, Bangladesh Financial Intelligence Unit (BFIU)
through a Suspicious Transaction Report (STR) as per Section 25(1) of the
MLP 2012.
To provide above information to Bangladesh Bank as and when required.

j) Responsibility Assignment
SBL establishes clear lines of internal accountability, responsibility and
reporting. Primary responsibility for the prevention of money laundering rests
with the business departments with which clients primarily come into contact.
They must ensure appropriate internal controls are in place and operating
effectively and that staff are adequately trained. The business is supported in
meeting its responsibilities by the Risk Management, IT, Operations and Finance
departments.
k) CAMLCO and Central Compliance Committee (CCC):
The Chief Executive Officer will give appointment to the Chief Anti Money
Laundering Compliance Officer (CAMLCO) following the criteria set by the
regulator. CAMLCO must have sufficient authority to implement and enforce
business-wide anti-money laundering policies, procedures and measures. There
will be a unit called the Central Compliance Committee (CCC) at the Corporate
Office headed by the CAMLCO. This committee will consist of senior
management staff from IT, Business, Operations, Risk Management and Finance
departments as per the directive of the Bangladesh Bank.
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l) BAMLCO
All branches will have a designated Branch Anti Money Laundering Compliance
Officer (BAMLCO) who must ensure adequate client and business related
controls are being adhered to and security measures and properly functioning.
m) Money Laundering Prevention Training
To ensure proper compliance of anti-money laundering and anti-terrorism
activities SBL shall arrange suitable training for its officials. An ongoing training
program has to be followed so that the members of the staff are adequately
trained in AML and CFT procedures. All employees responsible for carrying out
transaction and/or for initiating and/or establishing business relationships must
undergo anti money laundering training. SBL ensures training including
refresher training for all staff on Prevention of Money Laundering as per
guideline and instructions of Bangladesh bank. Training record (date, venue,
resource person, training duration, schedule, trainee info etc.) must be kept by
HRM department. CCC holds ownership of training with the co-operation of the
companys HR department which will preserve all data related to training and
provide relevant information as and when required.
n) Client Identification & Verification
The company must ascertain client identity in the following cases:

When entering into a lasting business relationship.

When performing a single transaction or providing corporate advisory
services to a client.

Generally clients are required to provide all information through an Account

Opening form. It is mandatory that, the concern officer has to collect and verify
correct and complete information related to the client using reliable documents
to prevent money laundering and terrorist financing and to keep the SBL free
from such risks. It is important to emphasize that the client identification
process does not end at the point of account opening. It is necessary to confirm
and update information about identity, such as change of address and the
extent of additional KYC information to be collected.
Identification of Ultimate Beneficial Owner
Whenever a new client relationship is established, the company must ascertain
the identity of the ultimate natural person who owns or

Controls the client or is assets

On whose behalf the transaction is carried out or the business relationship is
established
Who has significant influence over the affairs of the company (in case of an
institutional client)
Who holds 20% or above shares of a company (in case of an institutional
client)

o) Politically Exposed Persons (PEPs)

As per AML Circular No. 14 dated 25 September 2007 issued by Bangladesh
Bank, PEPs refer to Individuals who are or have been entrusted with prominent
public functions in a foreign country, for example Heads of State or of
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government, senior politicians, senior government, judicial or military officials,

senior executives of state owned corporations, important political party
officials. Business relationships with family members or close associates of
PEPs involve reputation risks similar to those with PEPs themselves.
Prior to entering into a business relationship with PEPs a branch or relationship
manager must take approval from the CAMLCO with the recommendation of the
concerned business (divisional) head. PEP accounts will fall under the high risk
client category of the KYC (as outlined below in the KYC Policy).
To avoid reputational and legal risks which the company may face, it should:

Take reasonable measures to establish the sources of wealth and the

sources of funds of the PEPs.
Exercise greater scrutiny and monitor all PEP accounts
Require senior management to determine whether to continue the
relationship where an existing client subsequently becomes or is found to be
PEP
Estimate net worth including financial statements
Information on immediate family members or close associates having
transaction authority over the account.
References or other information to confirm the reputation of the client.

p) Sanction Policy
The company will follow the sanction policy as and when imposed by
Bangladesh bank, special reference list provided by OFAC, United Nations or
other regulatory organizations acceptable to SBL. The company will establish
procedures to ensure that before a business relationship is established the list
of sanctioned names are checked and any match is referred to the CAMLCO for
further decision and approval.

q) Prevention of Money Laundering

Client Due Diligence one of the best methods of preventing and deterring
money laundering is a sound knowledge of a clients business and pattern of
financial transactions and commitments. The procedure of Know Your
Client or KYC is not only an essential tool to avoid involvement in money
laundering but also a principle of good business.

KYC Risk Grading SBL adopts a risk classification of its clients on the basis
of KYC information in line with the KYC profile form prescribed by Bangladesh
Bank (where relevant). All relationships having a risk rating of 4 and above
will be treated as a high risk. However, any business relationship can be
classified as high risk on subjective grounds. Prior to accepting a high risk
client, the branch manager or relationship manager has to obtain written
approval from the CAMCLO with the recommendation of the concerned
business department head. All high risk accounts will be monitored on a
yearly basis. KYC related guidelines are given below in details in the KYC
Policy Section.

r) Transaction Monitoring
Adequate controls must be in place to monitor on an ongoing basis the relevant
activities in the course of the business relationship. Inconsistency is measured
against the stated information in the KYC of the client. The following areas need
to be monitored:
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Transaction type
Pattern of transactions
Unusually large amounts
Geographical origin/destination
Possible trade related to market manipulation
Possible trade related to insider trading
Any type of fraudulent activities

s) Recognition and Reporting of Suspicious Transactions (STR)

There are legal obligations under the law to disclose any suspicious
transactions to the relevant authority and failure to do so is an offence.
Branches must ensure all staff reports any suspicious transactions to the
BAMLCO who will consider such a report in the light of all other relevant
information and determine whether this gives rise to a suspicion. All reports of
suspicious activities must reach the CAMLCO and only the CAMLCO will have
the authority to determine whether to report to the Bangladesh Bank. No
further action should be taken on the account until notification from
Bangladesh Bank has been received.

The process of suspicious transaction reporting is given below:

Detection of unusual Transaction/activity
(Any officer)

Evaluate By Branch

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Not Suspicious
Close the file with proper

Findings

record

Stop
Send to CAMLCO keep record

Evaluation CCC

Not Suspicious
Findings

record

Close the file with proper

Suspicious
Stop
Report to BFIU and keep record

t) Record Keeping
The requirement contained in the MLP Act 2012 is to retain correct and full
records of clients identification and transactions for at least 5 years from the
date of closure of the relationship. Where there has been a report of suspicious
activity or the company is aware of an ongoing investigation into money
laundering relating to a client of a transaction, records should be retained until
confirmation is received that the matter has been concluded.
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3. Policy on Combating Financing of Terrorism

a) Purpose
Global developments over the past two decades have led to an increased need
to combat money laundering and terrorism financing. Both these are global
problems that not only threaten security, but also compromise the stability,
transparency, and efficiency of financial
systems, thus undermining economic prosperity. Such global threats of financing
terrorism have led financial sector regulators and financial institutions to
strengthen their vigilance in support of the efforts of governments to more
easily detect attempts to finance terrorism and to minimize the possibility that
their jurisdictions or institutions become involved.
In light of these developments Bangladesh has enacted a special law, the AntiTerrorism Act 2009 to prevent terrorism and to lay out punishment for acts of
terrorism. Financing is a key to terrorist activities and has been criminalized
under this Act accordingly. This act sets out the expectations of the government
in relation to the minimum standards for combating of the financing of terrorism
(CFT) practices by all Financial Institutions and related intermediaries.
SBL acknowledges and supports the need for a partnership between
government, law enforcement agencies, private sector and financial institutions
to prevent laundering of proceeds of criminal activities and ultimately financing
of terrorism. The Board has accordingly supported this policy to strengthen
internal controls and procedures to counter terrorist financing. In addition the
Board and Senior Management are strongly committed to setting high standards
of identification and Client Due Diligence (CDD) across the entire client base.
The purpose of this policy is to provide a guideline to ensure compliance of laws
and regulations regarding the Anti-Terrorism Act 2009.
b) Senior Management Commitment
The Board of Directors has ultimate responsibility for the effectiveness of the
Combating Financing of Terrorism (CFT) framework. The Board has an oversight
role designed to ensure inter alia that there is compliance with all the relevant
laws and regulations. Directors and senior management need to be aware that:

The use of an internal policy does not absolve directors of their responsibility
to ensure that the policy is appropriate for the company and compliant with
Bangladesh Bank laws, regulations and guidelines.
Branches of the company are expected to comply with the requirements of
this guideline.
In case of some operational functions done through outsourcing, the
company retains full responsibility for compliance with local laws, regulations
and guidelines.
Directors should therefore demonstrate their commitment to an effective
Combating Financing of Terrorism program by:

Understanding the statutory duties placed upon them, their staff and the
entity itself;
Approving Anti-Terrorism Policy and procedures that are appropriate for the
risks faced by the company.
Assuring that the company is in compliance with its statutory responsibilities
as it relates to CFT.
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Senior management of Sheltech Brokerage Limited (SBL) should consider

CFT as part of the overall risk management strategy as it exposes the
company to transaction, compliance & reputation risk
c) Terrorist Financing
Terrorist financing can be simply defined as financial support in any form of
terrorism or of those who encourage, plan, or engage in terrorism.
The UN defines Terrorist Financing as:
If any person commits an offense by any means, directly or indirectly, unlawfully
and willingly, provides or collects funds with the intention that they should be
used or in the knowledge that they are to be used, in full or in part, in order to
carry out:

An act which constitutes an offence within the scope of and as defined

in one of the treaties listed in the annex to the convention; or

Any other act intended to cause death or serious bodily injury to a civilian, or
to any other person not taking any active part in the hostilities in a situation
of armed conflict, when the purpose of such act, by its nature or context, is
to intimidate a population, or to compel a government or an international
organization to do or to abstain from doing an act.

Section 7 of the Anti-Terrorism Act 2009 (amended 2012) of Bangladesh

classifies the following under terrorist financing:

If any person or entity knowingly supplies/receives/collects or expresses the

intention to supply/receive/collects money, service, material support or any
other property to another person or entity and where there are reasonable
grounds to believe that the full or partial amount of the same have been
used or may be used for any purpose by an individual terrorist, terrorist
entity or terrorist group or terrorist organization then he or she or the said
entity shall be treated committing the offence of financing for terrorist
activities.

If any person or entity knowingly instigate in such a manner, another person

or entity to supply, receive, or arrange money, services, material support or
any other property and where there are reasonable grounds to believe that
the full or the partial amount of the same have been used or may be used
for any purpose by an individual terrorist, terrorist entity or terrorist group or
terrorist organization then he or she or the said entity will be treated
committing the offence of financing for terrorist activities.

d) Sources of Terrorist Financing

Terrorism financing is done mainly to facilitate an extremist group by providing
financial support aiming to establish or circulate their ideology. Such financial
assistance may be provided directly or indirectly or may be attempted and
amount of money may be significantly low with several in numbers. There are
two primary sources of financing for terrorist activities. The first involves getting
financial support from countries, organizations or individuals and the other one
involves revenue-generating activities, which may be linked to legal or criminal
fronts.
i.

Financial Support - Terrorism could be sponsored by a country

16

or government, although this is believed to have declined in

recent years. State support may be replaced by support from
other sources, such as individuals with sufficient financial
means.
ii. Revenue generating activities - the revenue-generating activities of
terrorist groups may include criminal acts, and therefore may appear
similar to other criminal organizations. Kidnapping and extortion can
serve a dual purpose of providing needed financial resources while
furthering the main terrorist objective of intimidating the target
population. In addition, terrorist groups may use smuggling, fraud, theft,
robbery, and narcotics trafficking to generate funds.
Financing for terrorist groups may also include legitimately earned
income, which might include collection of membership dues and
subscriptions, sale of publications, speaking tours, cultural and social
events, as well as solicitation and appeals within the community. This
fund rising might be in the name of organizations with charitable or relief
status, so that donors are led to believe they are giving to a legitimate
good cause.
Only a few non-profit organizations or supposedly charitable
organizations have been implicated in terrorist financing networks in the
past, worldwide. In these cases, the organizations may in fact have
carried out some of the charitable or relief work. Members or donors may
have had no idea that a portion of funds raised by the charity was being
diverted to terrorist activities. This type of legitimately earned financing
might also include donations by terrorist group members of a portion of
their personal earnings.
e) Link between money laundering and terrorism financing
The techniques used to launder money are essentially the same as those used
to conceal the sources of, and uses for, terrorist financing. Funds used to
support terrorism may originate from legitimate sources, criminal activities, or
both. Nonetheless, disguising the source of fund for terrorist activities,
regardless of whether the source is of legitimate or illicit origin, is important. If
the source can be concealed, it remains available for future terrorist financing
activities. Similarly, it is important for terrorists to conceal the use of the funds
so that the financing activity goes undetected.
As noted above, a significant difference between money laundering and terrorist
financing is that the funds involved in terrorist financing may originate from
legitimate sources as well as criminal activities. Such legitimate sources may
include donations or gifts of cash or other assets to persons/organizations (e.g.
foundations or charities) to support terrorist activities.
f) Reasons for combating financing of terrorism

Bangladesh is actively involved with multinational and international

institutions. Its international relationship, trading and business in particular
are regulated by some domestic and international regulators and it is
mandatory to abide by those regulations.

Activities related to financing terrorism also cause greater prudential risks to

organizational soundness; since they can corrupt parts of the financial
system and undermine good governance of companies. So combating
money laundering and financing of terrorism are not only the regulatory
requirement but also an act of self interest.

Terrorist activities undermine consumer and investor confidence and such

17

deterioration of confidence can reduce the incentive to spend and thus

cause a drop in asset prices, which has a significant impact on the socioeconomic activities of the country.

Terrorist Financing may also have broad contamination

on legal financial institutions and related transactions.
transactions involving foreign participants, although
reported to have become less desirable because of
terrorist financing.

and spillover effects

For example, some
perfectly legal, are
an association with

g) Responsibility and Authority of Bangladesh Bank

i.

Under the Anti-Terrorism Act 2009 (amended 2012), Bangladesh Bank has
been invested with wide powers and authority to take necessary measures to
prevent and detect transactions intended to commit offence under this Act,
and to this end, it will have the following power & control:

Requiring any reporting organizations to provide statement of suspicious

transactions and keep it secret if not permitted under the law to publish.
Compile and preserve all records, editions and statistics.
Create and maintain a database of all suspicious transaction reports.
Analyze the reports on suspicious transaction.
Monitor and observe the activities of reporting organizations
Issue instructions to reporting organizations directing them to take
preventive measures against terrorist financing activities.
Inspect reporting organizations with a purpose of detecting transactions
suspected to be associated with terrorist financing.
Provide training to staffs and officers so that they can detect and prevent
transactions suspected connected with terrorist financing.

ii. As soon as Bangladesh Bank identifies suspicious transactions

connected with terrorism in any reporting organization or its client,
shall inform the appropriate law enforcement agency and extend all
assistance to the concerned authority in its enquiry and
investigation.
h) Responsibilities of Sheltech Brokerage Limited (SBL)

SBL will take appropriate measures with the alertness and responsibility
relating to identify and control of transaction connected with terrorist
activities under the law.
The Board of Directors will issue instructions relating to the responsibilities of
officers and will ensure Bangladesh Banks instructions.

i) Offence and Penalties

i.

Terrorist Activities if any person either a Bangladeshi citizen or a foreign

national poses a threat to cause or compel government or any person to do
any activity to undermine the unity, integrity, security or sovereignty of
Bangladesh
-

By murder, inflicting grievous hurt, kidnapping or causing harm to

anyones property by keeping in possession any explosives, inflammable
items, arms or any other chemical substance to cause dishonest intention
under situation (a); or

Attempts to threaten the security of any other country by destruction of

its assets; or
18

By knowingly using/possessing assets related to terrorism; or

-

Assisting individuals/organizations mentioned in Schedule 1 of Anti

Terrorism Act 2009 (amended 2012) he will be held to committing
terrorist activities.

ii. Financing terrorist activities

-

If any person provides money, service or any property or persuades

others to attain them and if he desires to use them in any terrorist
activities or if there are sufficient reasons that these will be used or
likely to be used in terrorist activities then he or she will be liable
have committed offence for financing the terrorism.

If any person acquires money, service or any property and wishes

to use them in any terrorist activities or there lies sufficient reason
to believe that those will be used or likely to be used in terrorist
activities, then he will be deemed to have committed offence for
financing terrorism.

iii. Membership of a banned Organization - if any person holds a membership in

a banned organization or claims to be subscribing to a banned organization,
he will be deemed to have committed an offence under this Act.
iv. Supporting or subscribing to a banned organization
-

If anyone requests anybody to support the banned organization or

arranges a meeting or help to arrange a meeting to speed up the
activities of the organization or deliver speeches in its favor, then he
will be turned to have committed the offence; or

If anyone transmits information through radio, television or electronic or

print media to seek support to help increase the activity of the banned
organization, he will be deemed to have committed an offence under this
Act.

Giving shelter to the offender If anyone knowing that a person has

committed an offence or has sufficient reason to believe that the person
is the offender gives shelter to this offender, trying to shelter him from
the punishment, he will be deemed to have committed an offence under
this Act.

Penalties - Anybody committing terrorist activities will be punishable as

per Section 18 of the Anti-Terrorism Act 2009 (amended 2012).
j) Client Identification Procedures with Due Diligence
Client due diligence is an essential element of the effort to prevent the financial
system from being used to perpetrate money laundering and terrorist financing.
SBL will be ultimately responsible for verifying the identity of their clients and in
this regard has to avoid the acceptance of anonymous accounts or accounts in
fictitious names.
i.

Client Identification Client identification is an essential element of KYC

standards, a client includes:
-

The person or entity that maintains an account with the company or

19

those on whose behalf an account is maintained (i.e. beneficial owners)

-

The beneficiaries of transactions conducted by professional intermediaries

Any person or entity connected with a financial transaction and business
who can pose a significant reputation or other risk to the company.

ai. What constitutes a Persons Identity - identity generally means a set of

attributes which uniquely define a natural or legal person. There are three
main elements which constitutes the identity of client are:
-

The physical identity (e.g. name, date of birth, father/mother/spouse

name, address etc.)
Documentary proof for physical identity (TIN, National ID, employer ID,
Passport, Driving License/ Bank Account Statement/ Certificate etc.)
The activity undertaken (relationship with client)

Confirmation of a persons address is also necessary in determining whether a

client is the resident of a high-risk country. Knowledge of both residence and
nationality are also necessary, in a non money-laundering context, to avoid
breaches of UN or other international sanctions to which Bangladesh is a party.
Where a passport is taken as evidence, the number, date and place of issue
should be recorded.
The other main element in a persons identity is sufficient information about the
nature of the business that the client expects to undertake, and any expected or
predictable, pattern of transactions.
Once relationship has been established, reasonable steps should be taken by the
company to ensure that descriptive information is kept up to date as
opportunities arise. It is important to emphasize that the client identification
process do not end at the point of application. The requirement of confirming and
updating information about identity, such as changes of address, and the extent
of additional KYC information to be collected over time will differ from sector to
sector and between institutions within any sector. It will also depend on the
nature of the product or service being offered, and whether personal contact is
maintained enabling file notes of discussion to be made or whether all contact
with the client is remote.
iii. Individual Client - where verification of identity is required, the following
information should be obtained from each individual applicant for opening
account or other relationships:
-

True name and/or names used

Name of the spouse
Parents names
Date of birth
Current and permanent address
Details of occupation/employment
Sources of wealth or income

One or more of the following steps is recommended to verify addresses:

- Provision of a recent utility bill, tax assessment or bank statement containing
details of the address (to guard against forged copies it is strongly
recommended that original documents are examined)
- Checking the National ID database (if possible)
- Checking the telephone directory
20

- Physical visit to home/office

- Mailing thanks letter etc.
The information obtained should demonstrate that a person of that name exists
at the address given, and that the applicant is the person. Identification
documents, either originals or certified copies, must be pre-signed and bear a
photograph of the applicant, e.g.:
- Current valid passport
- Valid driving license
- National ID Card
- Employers ID card
- A Bangladeshi employer ID card bearing the photograph and signature of the
applicant
- A certificate from any local government organs such as Union Council
Chairman, Ward Commissioner etc. or any respectable person acceptable
to the Company
- Any other identification documents with photograph, which is acceptable by
the Company
Identification documents which do not bear photographs or signatures, or are
easy to obtain, are normally not appropriate as sole evidence of identity, e.g.
birth certificate, credit cards, non-Bangladeshi driving license. Any photocopies of
documents showing photographs and signatures should be plainly legible.
In respect of joint accounts where the surname and/or address of the account
holders differ, the name and address of all account holders, not only the first
named, should normally be verified in accordance with the procedures set out
above. Any subsequent change to the clients name, address, or employment
details of which the Company becomes aware need to be recorded as part of the
KYC process. File copies of supporting evidence should be retained. The relevant
details must be recorded on the applicants file.
iv. Corporate Bodies and other Entities - because of the difficulties of identifying
beneficial ownership and the possible complexity of organization and
structures, corporate entities and trusts are the most likely vehicles to be
used for money laundering, particularly when a legitimate trading company is
involved. Particular care need to be taken to verify the legal existence of the
applicant and to ensure that any person purporting to act on behalf of the
applicant is authorized to do so. The reporting organization shall identify those
who have ultimate control over the business and the companys assets, with
particular attention being paid to any shareholders or others who exercise a
significant influence over the affairs of the company. Enquiries should be
made to confirm that the company exists for a legitimate trading or economic
purpose, and that it is not merely a brass plate company where the
controlling principals cannot be identified.
Particular care should be exercised when establishing business relationships
with companies incorporated or registered abroad, or companies with no
direct business link to Bangladesh. Such companies may be attempting to use
geographic or legal complication to interpose a layer of opacity between the
source of funds and their final destination. In such circumstances, company
should carry out effective checks on the source of funds and the nature of the
activity to be undertaken during the proposed business relationship. This is
particularly important if the corporate body is registered or has known links to
countries without anti-money laundering legislation and procedures
equivalent to Bangladeshs. In the case of a trading company, a visit to the
place of business may also be made to confirm the true nature of the
21

business.

The following documents should normally be obtained from companies:

-

Certified true copy of Certificate of Incorporation or equivalent, details of

the registered office, and place of business;
Certified true copy of the Memorandum and Articles of Association, or bylaws of the client.
Copy of the board resolution to open the account relationship and the
empowering authority for those who will operate any accounts;
Explanation of the nature of the applicant's business, the reason for the
relationship being established, an indication of the expected turnover, the
source of funds, and a copy of the last available financial statements
where appropriate;
Satisfactory evidence of the identity of each of the principal beneficial
owners being any person holding 20% interest or more or with principal
control over the companys assets and any person (or persons) on whose
instructions the signatories on the account are to act or may act where
such persons are not full time employees, officers or directors of the
company;
Satisfactory evidence of the identity of the account signatories, details of
their relationship with the company and if they are not employees an
explanation of the relationship. Subsequent changes to signatories must
be verified;
Copies of the list/register of directors.

Where the business relationship is being opened in a different name from

that of the applicant, the Company should also satisfy itself that the reason
for using the second name makes sense. The following persons (i.e.
individuals or legal entities) must also be identified in line with this part of
the notes:
-

All the directors who will be responsible for the operation of the account /
transaction.
All the authorized signatories for the account/transaction.
All holders of powers of attorney to operate the account/transaction.
The beneficial owner(s) of the company
The majority shareholders of a private limited company.

k) Powers of Attorney/Nominee/Mandates to Operate Accounts

The authority to deal with assets under a power of attorney constitutes a
business relationship and therefore, where appropriate, it may be advisable to
establish the identities of holders of powers of attorney, the guarantor of the
power of attorney and third party mandates. Records of all transactions
undertaken in accordance with a power of attorney should be kept.
l) Politically Exposed Persons (PEP)
As per AML Circular No. 14 dated 25 September 2007 issued by Bangladesh
22

Bank, PEPs refer to Individuals who are or have been entrusted with prominent
public functions in a foreign country, for example Heads of State or of
government, senior politicians, senior government, judicial or military officials,
senior executives of state owned corporations, important political party
officials. Business relationships with family members or close associates of
PEPs involve reputation risks similar to those with PEPs themselves. Prior to
entering into a business relationship with PEPs a branch or relationship
manager must take approval from the CAMLCO with the recommendation of the
concerned business (divisional) head. PEP accounts will fall under the high risk
client category of the KYC (as outlined below in the KYC Policy).
To avoid reputational and legal risks which the company may face, it should:

Take reasonable measures to establish the sources of wealth and the

sources of funds of the PEPs.
Exercise greater scrutiny and monitor all PEP accounts
Require senior management to determine whether to continue the
relationship where an existing client subsequently becomes or is found to be
PEP
Estimate net worth including financial statements
Information on immediate family members or close associates having
transaction authority over the account.
References or other information to confirm the reputation of the client.

m) Prevention of Terrorist Financing

corporate
clients
before
rendering
them financial
services.
Management
should
objectives
maintain
offor the
an
information
relevant
Anti-Terrorism
program
to inform
Legislation
those and
clients
inherent
of the
requirements
financial
institutions.
This guideline includes a description of the types of client that are likely to
pose a higher than average risk to the company. The policy ensures that
transactions will not be conducted for accounts opened with (prospective)
clients who fail to provide satisfactory evidence of their identity. Sheltech
Brokerage Limited (SBL) will conduct more extensive due diligence for
politically exposed persons (PEPs). The front line executives will make
reasonable efforts to ascertain that the clients source of wealth is not from
illegal activities and where appropriate, review the clients profile. The RM
will not accept or maintain a business relationship if the institution knows or
must assume that the funds derive from corruption or misuse of public
assets, without prejudice to any obligation the institution has under criminal
law or other laws or regulations. Moreover, executives will take necessary
measures in preventing the unlawful use of entities identified as vulnerable,
such as charitable or non-profit organizations, to be use as conduits for
criminal proceeds or terrorist financing.
ii. Know Your Client Procedure - Sheltech Brokerage Limited (SBL) is required to
perform due diligence on all prospective clients prior to opening an account.
This process is completed by fulfilling the documentation requirements
(Account Application, Introduction, Source of funds and Identification for
example) and also a Know Your Client profile which is used to record a
clients source of wealth.
Once the identification procedures have been completed and the client
relationship is established, Relationship Manager has to monitor the conduct
of the relationship/account to ensure that it is consistent with the nature of
business stated when the relationship/account was opened. This has to be
done firstly by staff being diligent, reporting suspicious transactions
undertaken by the client, updating the clients KYC profile for any significant
changes in their lifestyle (e.g., change of employment status, increase in net
worth) and by monitoring the transaction activity over the clients account
on a periodic basis.
23

KYC profile would give the basic information about the client like, Name,
Address, Tel/Fax Numbers, line of business, Annual sales. If the client is a
Public Figure, the account will become automatically a High Risk Account. In
the case of high net worth Accounts, the information will include net worth of
the client, source of funds etc.
Only establishing the identity of client and taking a transaction profile is not
the end of the process. Monitor account activity to determine those
transactions that do not conform to the declared profile is also essential.
iii. Client Acceptance Procedures - Clients are vital for the Brokerage business.
Day-by day competition is increasing, and therefore Broker Houses have to
pay much more attention to satisfy clients. In view this we attempt to
provide best services to our clients. We are also aware that at times clients
pose the risk of Money Laundering and financing terrorism to the Capital
Market Intermediaries, particularly to SBL. An adequate KYC and client
acceptance procedures can prevent this type of risk as outlined below:

No account shall be opened in anonymous / benami name(s).

Uniform A/C Opening Forms and KYC Profile have to be used.
Clients risk must be assessed as per parameters of risk perception as
clearly defined in KYC Profile form.
Documentation requirements and other information must be collected, as
per the requirements of the MLP (Amendment) Act, 2012 and guidelines
issued by BFIU, Bangladesh from time to time and relevant Laws/Rules of
Bangladesh Securities and Exchange Commission.
In case of opening a Politically Exposed Persons (PEP) account, the
company shall comply with the instructions contained in AML Circular No.
14 dated 25.09.2007 issued by Bangladesh Institution. Such type of
accounts will be categorized as high risk and will require very high level
monitoring.
At the time of opening new accounts the company to seek only such
information from the client which is relevant. The client profile is a
confidential document; hence this shall not be disclosed to any other
persons or for any other purposes.
At the time of opening any new account source of fund, income or wealth
complete information must be taken.
Detailed information of the Beneficial Owner must be taken (in case of
company; information of the controlling shareholder and/or whoever
owning 20% or more share of the company) at the time of opening any
account.
The concern officer will conduct necessary checks before opening a new
account to ensure that the identity of the client does not match with any
person known criminal background or with banned entities such as
individual terrorists or terrorist organizations etc.
The concern officer shall verify the identity of the client using reliable
sources, documents etc. but it must retain copies of all references,
documents used to verify the identity of the client.

n) Sanction Policy
The company will follow the sanction policy as and when imposed by
Bangladesh Bank, special reference list provided by OFAC, United Nations or
other regulatory organizations acceptable to Sheltech Brokerage Limited (SBL).
24

The company will establish procedures to ensure that before a business

relationship is established the list of sanctioned names are checked and any
match is referred to the CAMLCO for further decision and approval.
o) Suspicion Indicators
The following are common indicators that may point to a suspicious
transaction, whether completed or attempted as explained below:

Client provides false information or information that seems unreliable.

Client offers money, gratuities or unusual favors for the provision of services
that may appear unusual or suspicious.
It is observed that a client is the subject of a money laundering, terrorist
financing, and insider trading or market manipulation related investigation.
It is known from a reliable source (that can include media or other open
sources), that a client is suspected of being involved in illegal activity.
A client name listed under UN or Local sanctions list.
A new or prospective client is known to you as having a questionable legal
reputation or criminal background.
Transaction involves a suspected shell entity (that is, a corporation
that has no assets, operations or other reason to exist).
Client attempts to convince employee not to complete necessary
documentation required for the transaction/CDD process.
Client makes inquiries that would indicate a desire to avoid reporting.
Client has unusual knowledge of the law in relation to suspicious transaction
reporting.
Client is quick to volunteer that funds are clean or not being laundered.
Client appears to be collaborating with others to avoid record keeping, Client
identification or reporting thresholds.
Client provides doubtful or vague information.
Client produces seemingly false identification or identification that appears
to be counterfeited, altered or inaccurate.
Client refuses to produce personal identification documents.
Client only submits copies of personal identification documents.
Client wants to establish identity using something other than his or her
personal identification documents.
Clients supporting documentation lacks important details such as a phone
number.
Client inordinately delays presenting corporate documents.
All identification presented is foreign or cannot be checked for some reason.
All identification documents presented appear new or have recent issue
dates.
Client presents different identification documents at different times.
Client alters the transaction after being asked for identity documents.
Client presents different identification documents each time a transaction is
conducted.
Accounts that have been inactive suddenly experience large investments
that are inconsistent with the normal investment practice of the Client or
his/her financial ability.
Any dealing with a third party when the identity of the beneficiary or
counterparty is undisclosed.
Client attempts to purchase investments with cash.
Client admits or makes statements about involvement in criminal activities.
Client does not want correspondence sent to home address.
Client appears to have accounts with several financial institutions in one
area for no apparent reason.
Client repeatedly uses an address but frequently changes the names
involved.
25

Client shows uncommon curiosity about internal systems, controls and

policies.
Client presents confusing details about the transaction or knows few details
about its purpose.
Client appears to informally record large volume transactions, using
unconventional bookkeeping methods or off-the-record books.
Client over justifies or explains the transaction.
Client is secretive and reluctant to meet in person.
Client is nervous, not in keeping with the transaction.
Client is involved in transactions that are suspicious but seems blind to being
involved in money laundering activities.
Clients home or business telephone number has been disconnected or there
is no such number when an attempt is made to contact Client shortly after
opening account.
Normal attempts to verify the background of a new or prospective Client are
difficult.
Client appears to be acting on behalf of a third party, but does not tell you.
Client insists that a transaction be done quickly.
Inconsistencies appear in the Clients presentation of the transaction.
The transaction does not appear to make sense or is out of keeping with
usual or expected activity for the Client.
Client appears to have recently established a series of new relationships with
different financial entities.
Client attempts to develop close rapport with staff.
Client uses aliases and a variety of similar but different addresses.
Client spells his or her name differently from one transaction to another.
Client uses a post office box or General Delivery address, or other type of
mail drop address, instead of a street address when this is not the norm for
that area.
Client uses securities or futures brokerage firm as a place to hold funds that
are not being used in trading of securities or futures for an extended period
of time and such activity is inconsistent with the normal investment practice
of the Client or their financial ability.
Client wishes monies received through the sale of shares to be deposited
into a bank account rather than a trading or brokerage account which is
inconsistent with the normal practice of the Client.
Client makes large or unusual settlements of securities in cash.
The entry of matching buying and selling of particular securities or futures
contracts (called match trading), creating the illusion of trading.
Transfers of funds or securities between accounts not known to be related to
the Client.
Several Clients open accounts within a short period of time to trade the
same stock.
Client is an institutional trader that trades large blocks of low priced
securities on behalf of an unidentified party.
Unrelated Clients redirect funds toward the same account.
Trades conducted by entities that you know have been named or sanctioned
by regulators in the past for irregular or inappropriate trading activity.
Transaction of very large size which may manipulate stock price.
All principals of Client are located outside of Bangladesh.
Client attempts to purchase investments with instruments in the name of a
third party.
Payments made by way of third party cheques are payable to, or endorsed
26

over to, the Client.

Transactions made by employees, or that you know are made by a relative of
your employee, to benefit unknown parties.
Third-party purchases of shares in other names (i.e., nominee accounts).
Unusually large amounts of securities or stock certificates in the names of
individuals other than the Client.

27

p) Recognition and Reporting of Suspicious Transactions (STR)

There are legal obligations under the law to disclose any suspicious transactions
to the relevant authority and failure to do so is an offence. Branches must ensure
all staff reports any suspicious transactions to the BAMLCO who will consider such
a report in the light of all other relevant information and determine whether this
gives rise to a suspicion. All reports of suspicious activities must reach the CAMLCO
and only the CAMLCO will have the authority to determine whether to report to the
Bangladesh Bank. No further action should be taken on the account until
notification from Bangladesh Bank has been received.

q) Record Keeping

The requirement contained in the MLP Act 2012 is to retain correct and full
records of clients identification and transactions for at least 5 years from the date
of closure of the relationship. Where there has been a report of suspicious activity
or the company is aware of an ongoing investigation into money laundering
relating to a client of a transaction, records should be retained until confirmation is
received that the matter has been concluded.

r) Training

An integral element of the fight against money laundering and the financing of
terrorism is the awareness of those charged with the responsibility of identifying
and analyzing potential illicit transactions. Company should, therefore, establish
ongoing employee training programs. Training should be targeted at all employees
but added emphasis should be placed on the training of compliance and audit staff
because of their critical role in sensitizing the broader staff complement to AML/CFT
issues and ensuring compliance with policy and procedures.

28

26

29

a)

b)

c)

d)

4. Know Your Client (KYC) Policy

Purpose

No business is risk free and Broker Houses are no exception, as they are more
prone to be used as means of unlawful activities. Accepted fact is that risks can
never be neutralized but can be mitigated to a minimum level. As such, broker
houses are increasingly recognizing the importance of adequate controls
mechanism and procedures to be in place so they know their clients better thereby
minimizing risks to the best possible extent. Adequate due diligence on new and
existing clients is a key part of these control mechanisms. Without due diligence,
broker houses can become subject to reputational, operational, legal and
concentration risks which can result in significance financial loss.

SBL has recognized the fact that having a Know Your Client (KYC) policy in
place is an integral part and prerequisite for the brokerage business to ensure the
proper control mechanism with due diligence and prevent the illegitimate, illicit and
unlawful activities.

General Provision

The policy will become effective upon approved by the Board. All employees of
SBL need to comply with the policy and all relevant employees must be thoroughly
familiar with and make use of the material contained in this policy. This policy will
be kept updated by the Risk Management & Compliance Department of the Broker
Houses.

Purpose

To comply with the laws of the land along with Bangladesh Bank guidelines of
developing and implementing Know Your Client procedures.
To protect Companys reputation and the integrity of brokerage systems by
reducing the likelihood of company becoming a vehicle/means for or a victim of
financial crime and suffering consequential reputational damage.
To prevent all illegitimate financial/business transactions such as concealing of
identity of business/transaction or source of fund, money laundering, terrorist
financing, drug trafficking activities, unlawful/fraudulent transactions and any
other unethical business/transactions.
To constitute an essential part of sound risk management, e.g. by providing the
basis for identifying, limiting and controlling risk exposures in assets and
liabilities, including assets under management.

Policy and Procedure

Money laundering Prevention Act 2012 requires all reporting organizations to

maintain correct and detailed information with regards to identity of its client. SBL
is committed to preventing the use of its services and facilities for criminal
purposes. This Know Your Client (KYC) policy and the accompanying procedures
are SBLs primary defense against money laundering and other illegal activities.
The SBL know your client program is designed to help detect and prevent attempts
to use SBL or any of its products and services for money laundering or other illegal
30

e)

f)

g)

h)

activity. As part of its effort to detect and prevent money laundering, SBL is
committed to cooperating with regulators, Bangladesh Bank and Government
authorities to achieve this goal. Adherence to the KYC policy is essential.
Knowledge of and adherence to the processes described in this policy and
procedures is a job requirement for those involved in any way the acquisition and
approval of clients and the subsequent provision of products and services or
completion of business.

27

Guideline Principle

Principle 1: Do business with clients who are involved in legitimate business

activities and whose income and wealth are derived from legitimate sources.
Principle 2: Record the identity, background and business of all clients. Identify
and know the beneficial owners of all relationships and understand the business
purposes to which SBL goods and services are used to serve.
Principle 3: Be alert and regular monitor the relationship in order to
identify unusual or suspicious activity and take appropriate action when
questions of inconsistencies arise.

The above basic principle should govern all Sheltech Brokerage Limited (SBL)
dealings with clients and prospective clients.

Know Your Client (KYC) Guideline

KYC guideline includes following key elements:

Client Acceptance Policy

Client Identification

On-going Monitoring

Risk Management

Who is a Client?

For the purpose of KYC Procedure a Client is defined in AML circular No. 24
dated 03 March 2010, as:

Any person or institution maintaining an account of any type with

Brokerage Houses or having business relation.

The person or institution as true beneficial owner in whose favor the

account is operated.

Client Acceptance Policy

Clients are vital for the Brokerage business. Day-by day competition is
increasing, and therefore broker houses have to pay much more attention to satisfy
clients. In view this we attempt to provide best services to our clients. We are also
aware that at times clients pose the risk of Money Laundering and financing
terrorism to the Capital Market Intermediaries, particularly to Sheltech Brokerage
Limited (SBL). An adequate KYC and client acceptance procedures can prevent this
type of risk as outlined below:

31

No account shall be opened in anonymous / benami name(s).

Uniform A/C Opening Forms and KYC Profile have to be used.
Clients risk must be assessed as per parameters of risk perception as clearly
defined in KYC Profile form.

28

32

Documentation requirements and other information must be collected, as

per the requirements of the MLP (Amendment) Act, 2012 and guidelines
issued by BFIU, Bangladesh Bank from time to time and relevant Laws/Rules
of Bangladesh Securities and Exchange Commission.
In case of opening a Politically Exposed Persons (PEP) account, the company
shall comply with the instructions contained in AML Circular No. 14 dated
25.09.2007 issued by Bangladesh Bank. Such type of accounts will be
categorized as high risk and will require very high level monitoring.
The branch shall not open an account, where the company is unable to apply
appropriate client due diligence measures i.e. the branch is unable to verify
the identity and/or obtain documents required due to non-cooperation of the
customer or unreliability of the data/information furnished to the branch. But
the branch must be careful to avoid unnecessary harassment of the
customer.
At the time of opening new accounts the company to seek only such
information from the client which are relevant. The client profile is a
confidential document; hence this shall not be disclosed to any other
persons or for any other purposes.
At the time of opening any new account source of fund, income or wealth
complete information must be taken.
Detailed information of the Beneficial Owner must be taken (in case of
company; information of the controlling shareholder and/or whoever owning
20% or more share of the company) at the time of opening any account.
The concern officer will conduct necessary checks before opening a new
account to ensure that the identity of the client does not match with any
person known criminal background or with banned entities such as individual
terrorists or terrorist organizations etc.
The concern officer shall verify the identity of the client using reliable
sources, documents etc. but it must retain copies of all references,
documents used to verify the identity of the client.

ii) Client Identification

Generally a client is required to provide information through an Account opening

form. It is mandatory that, the concern officer has to collect and verify the correct
and complete information provided by client using reliable documents to prevent
money laundering and terrorist financing and to keep the Sheltech Brokerage
Limited (SBL) free from risks. It is important to emphasize that the client
identification process do not end at the point of application. Necessary to confirm
and update information about identity, such change of address and the extent of
additional KYC information to be collected. The nature of information/documents
required depends on the type of clients (individual/corporate etc).

i. Individual Clients: Where verification of identity is required, the following

information should be obtained from each individual applicant for opening
account or other relationships, and should be independently verified by the
company:

True name and/or names used

Parents name, Spouse name
33

Date of Birth

29

34

Present and Permanent Addresses

Details of occupation/employment
Source of income/fund
Nationality
Copy of Valid passport ( all relevant pages-number, date & place of issue)
Copy Valid driving License
Copy of National ID Card
Nationality certificate from any local government organs such as Union
Council Chairman, Ward Commissioner etc. or any respectable person
acceptable to the Company (with attached photograph)
TIN Certificate (if available)
Copy of a recent utility bill or Tax assessment
Passport size photograph of the applicant(s) duly attested by the by
introducer/relationship manager
Bank certificate/latest bank statement
Details of occupation/employment along with details employer or business
address.
New accounts should be introduced by existing clients. If any staffs are
introducing new account they should personally know the client to verify
client address personally.
No account will be opened without any introducer signature in the A/C
opening form.
Appointment of nominee is mandatory for opening Account (individual &
joint account).
Photograph of the nominee duly attested by the applicant.
In case of the nominee is minor, details of legal guardian should be taken
(such as name, address, relation with nominee and photograph). In case of
legal guardian (assigned by the court) certified copy of courts order should
be filed along with the account opening form.
Details information and photograph of authorized person attested by
applicant should be taken if applicant appoint authorized person.

ii. Corporate Bodies and other Entities - because of the difficulties of identifying
beneficial ownership and the possible complexity of organization and structures,
corporate entities and trusts are the most likely vehicles to be used for money
laundering, particularly when a legitimate trading company is involved.
Particular care need to be taken to verify the legal existence of the applicant
and to ensure that any person purporting to act on behalf of the applicant is
authorized to do so. The reporting organization shall identify those who have
ultimate control over the business and the companys assets, with particular
attention being paid to any shareholders or others who exercise a significant
influence over the affairs of the company. Enquiries should be made to confirm
that the company exists for a legitimate trading or economic purpose, and that
it is not merely a brass plate company where the controlling principals cannot
be identified.

Particular care should be exercised when establishing business relationships

with companies incorporated or registered abroad, or companies with no direct
business link to Bangladesh. Such companies may be attempting to use
geographic or legal complication to interpose a layer of opacity between the
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source of funds and their final destination. In such circumstances, bank should
carry out effective checks on the source of funds and the nature of the activity
to be undertaken during the proposed business relationship. This is particularly
important if the corporate body is registered or has known links to countries

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without anti -money laundering legislation and procedures equivalent to

Bangladeshs. In the case of a trading company, a visit to the place of business
may also be made to confirm the true nature of the business.

The following documents should normally be obtained from companies:

- Certified true copy of Certificate of Incorporation or equivalent, details of the

registered office, and place of business;
- Certified true copy of the Memorandum and Articles of Association, or by-laws
of the client.
- Copy of the board resolution to open the account relationship and the
empowering authority for those who will operate any accounts;
- Explanation of the nature of the applicant's business, the reason for the
relationship being established, an indication of the expected turnover, the
source of funds, and a copy of the last available financial statements where
appropriate;
- Satisfactory evidence of the identity of each of the principal beneficial owners
being any person holding 20% interest or more or with principal control over
the companys assets and any person (or persons) on whose instructions the
signatories on the account are to act or may act where such persons are not
full time employees, officers or directors of the company;
- Satisfactory evidence of the identity of the account signatories, details of their
relationship with the company and if they are not employees an explanation
of the relationship. Subsequent changes to signatories must be verified;
- Detail business information (such as clients full business/office address,
registered address, factory/industry address, business type along with
telephone number).
- Copies of the list/register of directors.
- Latest copy of Form XII approved by Register of Joint Stock Companies
Where the business relationship is being opened in a different name from that
of the applicant, the company should also satisfy itself that the reason for using
the second name makes sense. The following persons (i.e. individuals or legal
entities) must also be identified in line with this part of the notes:

All the directors or authorized persons who will be responsible for the
operation of the account
All the authorized signatories for the account.
All holders of powers of attorney to operate the account.
The beneficial owner(s) of the company
The majority shareholders of a private limited company.

iii. Partnership and Unincorporated Business

In the case of partnerships and other unincorporated businesses whose

partners/directors are not known to the company, the identity of all the partners
or equivalent should be verified in line with the requirements for personal
clients. Where a formal partnership agreement exists, a mandate from the
partnership authorizing the opening of an account and conferring authority on
those who will operate it should be obtained. Evidence of the trading address of
the business or partnership should be obtained and a copy of the latest

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report and accounts (audited where applicable). An explanation of the

nature of the business or partnership should be ascertained (but not necessarily
verified from a partnership deed) to ensure that it has a legitimate purpose.

In addition the following documents/information should be obtained for

Partnership and Unincorporated Business:
-

Copy of the Partnership Deed

Copy of the Valid Trade License
18-A permission from Bangladesh Bank (for GSA & Agents only)
Photograph of authorized person (if any attested by all partners) and detail
information of authorized person.
Partners letter of authority to open account and authorization for operation
Detail business information (such as clients full business/office address,
registered address, factory/industry address, business type along with
telephone number).
Copy of Tax assessment (if any).

j) Politically Exposed Persons (PEP)

As per AML Circular No. 14 dated 25 September 2007 issued by Bangladesh

Bank, PEPs refer to Individuals who are or have been entrusted with prominent
public functions in a foreign country, for example Heads of State or of government,
senior politicians, senior government, judicial or military officials, senior executives
of state owned corporations, important political party officials. Business
relationships with family members or close associates of PEPs involve reputation
risks similar to those with PEPs themselves.

Prior to entering into a business relationship with PEPs a branch or relationship

manager must take approval from the CAMLCO with the recommendation of the
concerned business (divisional) head. PEP accounts will fall under the high risk
client category of the KYC (as outlined below in the KYC Policy).

To avoid reputational and legal risks which the company may face, it should:

Take reasonable measures to establish the sources of wealth and the sources of
funds of the PEPs.
Exercise greater scrutiny and monitor all PEP accounts
Require senior management to determine whether to continue the relationship
where an existing client subsequently becomes or is found to be PEP
Estimate net worth including financial statements
Information on immediate family members or close associates having
transaction authority over the account.

k) On-going Monitoring

There should have adequate system and controls in place to monitor on an

ongoing basis the relevant activities in the course of the relationship. The
relationship Manager or concern officer is responsible to do ongoing monitoring.
Transaction monitoring is a continuous process. High risk accounts are to be
monitored by the concerned branch on a yearly basis. Branch will review the static
data and transactions of the account.

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Review and Update - the company has to review all the information related
with their clients that they preserved, after a certain period of time. If there
any substantial changes in clients business, profession, address, status or
any other things, the company need to update that and preserve duly.
Self assessment - Sheltech Brokerage Limited (SBL) must have a selfassessment process that will assess how effectively the financial institutions
money laundering prevention procedures enable management to identify
areas of risk or to assess the need for additional control mechanisms. The
self-assessment should conclude with a report documenting the work
performance, who performed it, how it was controlled and supervised and
the resulting findings, conclusions and recommendations. The selfassessment should advise management whether the internal procedures
and statutory obligations of the financial institution have been properly
discharged. The frequency of conducting the assessment and sharing the
report with higher management and Bangladesh Bank is prescribed and
amended by Bangladesh Financial Intelligence Unit time to time.

l) Risk management

i. Prohibited Client Types - While opening account the dealing

officer must check whether the applicant belongs to following
client category.

ii. Sanction Policy and Procedures - The Company will follow the sanction
policy as and when imposed by Bangladesh bank, special reference list
provided by OFAC, United Nations or other regulatory organizations
acceptable to Sheltech Brokerage Limited (SBL). The company will
establish procedures to ensure that before a business relationship is
established the list of sanctioned names are checked and any match is
referred to the CAMLCO for further decision and approval.

iii. Anonymous Relationship - Sheltech Brokerage Limited (SBL) will not

under any circumstance accept anonymous relationships for any
purpose, in any line of business. Beneficial owner information is required
in accordance with this policy for all business relationship with SBL.

iv. Known Beneficiaries of Corruption or Illegal Activities - Consistence with

Sheltech Brokerage Limited (SBLs) guiding principle, Sheltech Brokerage
Limited (SBL) will not accept any individual or entity as a client whose
wealth or funding has been accumulated through corruption or activities
that are illegal in the law of land or according to any international treaty
to which the country is a signatory.

v. Alert List - From time to time Sheltech Brokerage Limited (SBL) may
prevent for any of a variety of reasons that it would be inconsistent with
the strategy or goals of the company to deal with specific individuals or
entities. These preventions are communicated internally to Sheltech
Brokerage Limited (SBL) personnel by means of the posted Alert list.
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Sheltech Brokerage Limited (SBL) employees are responsible for checking

the Alert list as necessary before opening or establishing client
relationships. Because of this list relates specifically to proprietary
decisions, the contents of the list are not to be shared with any person or
entity outside Sheltech Brokerage Limited (SBL) nor may any individual
or entity advised that it or any other party is subject to Alert list review.

vi. Other Business Segments - From time to time Sheltech Brokerage Limited
(SBL) Business Units Heads may in their discretion require pre-approval
of clients or relationships involving other business segments.

vii. Regulatory Mandates - From time to time and as mandated by regulatory

authorities having jurisdiction over Sheltech Brokerage Limited (SBL), SBL
may implement certain procedures to enhance scrutiny of account
opening and business relationship in certain jurisdictions cited for
negligent or non-existent anti-money laundering controls. All prospective
clients must be reviewed in accordance with any Sheltech Brokerage
Limited (SBL) policies establishing a higher standard of scrutiny in
response to any government mandates.

viii.
KYC Risk Grading - Sheltech Brokerage Limited (SBL) adopts risk
classification of its client on the basis of KYC information in line with the
KYC profile form prescribed by the Bangladesh Bank. All accounts having
a risk rating of 4 and above will be treated as high risk accounts.
However, an account can be treated as high risk account on subjective
judgment. Prior to opening a high risk account, branch/department has
taken approval of CAMLCO with recommendation from respective
Business Head (HOB). A system based tools should have in place to deter
and detect high risk account. Branch will preserve the record of high risk
accounts and pay more attention on overall activities of such accounts.

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