GUIDELINES FOR PREVENTION OF MONEY LAUNDERING AND TERRORIST FINANCING

Transcription

1 GUIDELINES FOR PREVENTION OF MONEY LAUNDERING AND TERRORIST FINANCING Shariah Based Islami Bank Export Import Bank of Bangladesh Limited Anti-Money Laundering Division Head Office, Dhaka.

2 P R E F A C E Bank and other Financial Institutions conducting relevant financial business in a liquid product are clearly most vulnerable to use by money launderers, particularly where they are of high value. The activities of Banks / financial institutions are no longer limited within the geographic boundary of a country. Over the past several years the banking industry, financial institutions and the financial services industry have made significant strides in money laundering detection and prevention. As the activity involves high risk, an effective Anti-Money Laundering system, Corporate governance, Transparency, Accountability have become significant issues to ensure smooth performance of the banking industry throughout the world. An effective Anti-Money Laundering system could have contributed significantly in improving the performance of the commercial banks if the control, supervision and monitoring culture are bought in through policy guidelines and structural changes at the bank. In line with the international initiatives and standards, Bangladesh has also enacted Money Laundering Prevention Act (MLPA), 2012 (repealing the MLPA, 2009) and Anti Terrorism Act (ATA), 2009 (as amended in 2012). The new acts address all the deficiencies identified in the 2nd Mutual Evaluation of Bangladesh conducted by APG in 2008 to determine the extent of its compliance, with the global standards. Both the Acts have empowered Bangladesh Bank (BB) to perform the anchor role in combating ML&TF through issuing guidance and directives for reporting agencies including Financial Institutions (FIs), as defined in section 2(g) of MLPA, As a regulatory authority of the banks, Bangladesh Bank has devised and designed Anti-Money Laundering guidelines making an attempt to draw attention to the banking industry of the country. The issue of controlling and minimizing the risk elements in the Banking Industry is of vital issue as well as interest to Bangladesh Bank as a regulatory authority of the financial sector and segment of the economy. Considering the importance of Anti-Money Laundering, Export Import Bank of Bangladesh Limited has prepared the Guidelines for Prevention of Money Laundering and Terrorist Financing applying the suggestions and recommendation as laid down in the Guidance Notes and circulars provided by Bangladesh Bank.

3 CONTENTS CHAPTER I : BACKGROUND Introduction Defining Money Laundering Why Money Laundering is done Why we must combat Money Laundering Stages of Money Laundering Defining Terrorist Financing The Link Between Money Laundering and Terrorist Financing How To Combat Money Laundering And Terrorist Financing 6 CHAPTER II: PRODUCTS OF EXIM BANK 7 CHAPTER III: VULNERABILITIES OF FINANCIAL INSTITUTIONS Vulnerabilities of Products and Services Structural Vulnerabilities 24 CHAPTER IV: INTERNATIONAL INITIATIVES Introduction The United Nations The Financial Action Task Force The Basel Committee on Banking Supervision International Organization of Securities Commissioners The Egmont Group of Financial Intelligence Units Asia Pacific Group on Money Laundering (APG) CHAPTER V: NATIONAL INITIATIVES 32 CHAPTER VI : COMPLIANCE REQUIREMENTS Compliance Requirements Under The Laws Compliance Requirements Under Circulars Suspicious Transaction Report (STR) Targeted Financial Sanctions Supervisory Power Of Bangladesh Bank Penalties Under MLPA Penalties Under ATA Self Assessment Independent Testing Procedure CHAPTER VII: COMPLIANCE PROGRAM Development of Internal Policies, Procedures and Controls Establishment of Central Compliance Unit Appointment of CAMLCO Branch Anti-Money Laundering Compliance Officer (BAMLCO) Responsibilities of Other Employees A Sample Organization Chart Employee Training And Awareness Program Independent Audit Function... 52

4 CHAPTER VIII: CUSTOMER DUE DILIGENCE Know Your Customer Program Know Your Customer (KYC) Procedure Components Of KYC Program Know Your Employee (KYE) CHAPTER IX: RECORD KEEPING Statutory Requirements Retrieval of Records Inspection and Investigations Training Records Branch Level Record Keeping Sharing Records/Information of/to a Customer CHAPTER X: SUSPICIOUS TRANSACTION REPORT Definition Of STR/SAR Obligations Of Such Report Reasons For Reporting Of STR/SAR Identification And Evaluation of STR/SAR Risk-Based Approach Reporting Of STR/SAR Tipping Off Safe Harbor Provisions For Reporting Red Flags Or Indicators Of STR List of Abbreviations 72 Annexure-A 74 Annexure-G 77

5 CHAPTER I: BACKGROUND 1.1 INTRODUCTION The process of money laundering and terrorist financing (ML/TF) is very dynamic and ever evolving. The money launderers and terrorist financers are inventing more and more complicated and sophisticated procedures and using new technology for money laundering and terrorist financing. To address these emerging challenges, the global community has taken various initiatives against ML/TF. In accordance with international initiatives, Bangladesh has also acted on many fronts. Export Import Bank of Bangladesh Limited follows the rules and regulations of Bangladesh Bank and other regulatory authorities. The Guidelines have been prepared for the followings:- to facilitate the implementation of the Money Laundering Prevention Act (MLPA), 2012 (repealing the MLPA, 2009) and Anti Terrorism Act (ATA), 2009 (as amended in 2012), the Rules and Directives of the Bangladesh Bank. to counter money laundering activities and terrorist financing activities. the management of our Bank views money laundering prevention and combat terrorist financing as part of their risk, management strategies and not simply as a stand-alone as required by the legislation. where there are provisions in these guidelines relating to an account or accounts these will have relevance to mainstream banking activity but should, by analogy, be adapted appropriately to the situations covered by other relevant business. For example account could refer to bank accounts, Mudaraba term deposit or other investment products, trusts or a business relationship etc. 1.2 DEFINING MONEY LAUNDERING Money laundering can be defined in a number of ways. But the fundamental concept of money laundering is the process by which proceeds from a criminal activity are disguised to conceal their illicit origins. Most countries subscribe to the following definition which was adopted by the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988) (the Vienna Convention) and the United Nations Convention Against Transnational Organized Crime (2000) (the Palermo Convention): The conversion or transfer of property, knowing that such property is 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 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. 1

6 The Financial Action Task Force (FATF) 1, which is recognized as the international standard setter for anti-money laundering (AML) efforts, defines the term money laundering succinctly as the processing of criminal proceeds to disguise their illegal origin in order to legitimize the ill-gotten gains of crime. Money Laundering is defined in Section 2 (v) of the Money Laundering Prevention Act 2012 as follows: money laundering means (i) knowingly moving, converting, or transferring proceeds of crime or property involved in an offence for the following purposes:- 1. concealing or disguising the illicit nature, source, location, ownership or control of the proceeds of crime; or 2. assisting any person involved in the commission of the predicate offence to evade the legal consequences of such offence; (ii) smuggling money or property earned through legal or illegal means to a foreign country; (iii) knowingly transferring or remitting the proceeds of crime to a foreign country or remitting or bringing them into Bangladesh from a foreign country with the intention of hiding or disguising its illegal source; or (iv) concluding or attempting to conclude financial transactions in such a manner so as to reporting requirement under this Act may be avoided; (v) converting or moving or transferring property with the intention to instigate or assist for committing a predicate offence; (vi) acquiring, possessing or using any property, knowing that such property is the proceeds of a predicate offence; (vii) performing such activities so as to the illegal source of the proceeds of crime may be concealed or disguised; (viii) participating in, associating with, conspiring, attempting, abetting, instigate or counsel to commit any offences mentioned above; 1.3 WHY MONEY LAUNDERING IS DONE First, money represents the lifeblood of the organization/person that engages in criminal conduct for financial gain because it covers operating expenses and pays for an extravagant lifestyle. To spend money in these ways, criminals must make the money they derived illegally appear legitimate. Second, a trail of money from an offense to criminals can become incriminating evidence. Criminals must obscure or hide the source of their wealth or alternatively disguise ownership or control to ensure that illicit proceeds are not used to prosecute them. 1 The Financial Action Task Force on Money Laundering (FATF), formed by G-7 countries in 1989, is an intergovernmental body whose purpose is to develop and promote an international response to combat money laundering. In October, 2001, FATF expanded its mission to include combating the financing of terrorism. FATF is a policymaking body, which brings together legal, financial and law enforcement experts to achieve national legislation and regulatory AML and CFT reforms. Currently, its membership consists of 34 countries and territories and two regional organizations. 2

7 Third, the proceeds from crime often become the target of investigation and seizure. To shield ill-gotten gains from suspicion and protect them from seizure, criminals must conceal their existence or, alternatively, make them look legitimate. 1.4 WHY WE MUST COMBAT MONEY LAUNDERING Money laundering has potentially devastating economic, security, and social consequences. Money laundering is a vital process to making crime worthwhile. It provides the fuel for drug dealers, smugglers, terrorists, illegal arms dealers, corrupt public officials, and others to operate and expand their criminal enterprises. This drives up the cost of government due to the need for increased law enforcement and health care expenditures (for example, for treatment of drug addicts) to combat the serious consequences that result. Crime has become increasingly international in scope, and the financial aspects of crime have become more complex due to rapid advances in technology and the globalization of the financial services industry. Money laundering diminishes government tax revenue and therefore indirectly harms honest taxpayers. It also makes government tax collection more difficult. This loss of revenue generally means higher tax rates than would normally be the case if the untaxed proceeds of crime were legitimate. We also pay more taxes for public works expenditures inflated by corruption. And those of us who pay taxes pay more because of those who evade taxes. So we all experience higher costs of living than we would if financial crime including money laundering were prevented. Money laundering distorts asset and commodity prices and leads to misallocation of resources. For financial institutions it can lead to an unstable liability base and to unsound asset structures thereby creating risks of monetary instability and even systemic crisis. The loss of credibility and investor confidence, that such crisis can bring, has the potential of destabilizing financial systems, particularly in smaller economies. One of the most serious microeconomic effects of money laundering is felt in the private sector. Money launderers often use front companies, which co-mingle the proceeds of illicit activity with legitimate funds, to hide the ill-gotten gains. These front companies have access to substantial illicit funds, allowing them to subsidize front company products and services at levels well below market rates. This makes it difficult, if not impossible, for legitimate business to compete against front companies with subsidized funding, a situation that can result in the crowding out of private sector business by criminal organizations. No one knows exactly how much "dirty" money flows through the world's financial system every year, but the amounts involved are undoubtedly huge. 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. The social and political costs of laundered money are also serious as laundered money may be used to corrupt national institutions. Bribing of government officials undermines the moral fabric in society, and, by weakening collective ethical standards, corrupts our democratic institutions. When money laundering goes unchecked, it encourages the underlying criminal activity from which such money is generated. 3

8 A nation cannot afford to have its reputation and financial institutions tarnished by involvement with money laundering, especially in today's global economy. Money laundering erodes confidence in financial institutions and the underlying criminal activity -- fraud, counterfeiting, narcotics trafficking, and corruption -- weaken the reputation and standing of any financial institution. Actions by FIs to prevent money laundering are not only a regulatory requirement, but also an act of self-interest. A financial institution tainted by money laundering accusations from regulators, law enforcement agencies, may loss their good market reputation and damage the reputation of the country. It is very difficult and requires significant resources to rectify a problem that could be prevented with proper program. Besides its effect on macro level, ML/TF also affects individual financial institution. If a money launderer uses a financial institution for making his/her money legitimate, the business of that financial institution may hamper. If the money launderer withdraws his/her deposited money from an FI before maturity, the FI will face liquidity crisis if the amount is big enough. Moreover, if it was found that a FI is used for ML/TF activities, and it did not take proper action against that ML/TF, as per the laws of the country, the FI will have to face legal risk. Finally, the reputation of an FI can also be heavily affected through its involvement with ML/TF activities. It is generally recognized that effective efforts to combat money laundering cannot be carried out without the co-operation of financial institutions, their supervisory authorities and the law enforcement agencies. Accordingly, in order to address the concerns and obligations of these three parties, these Guidance Notes are drawn up. 1.5 STAGES 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. Bribery, extortion, robbery and street level purchases of drugs are almost always made with cash. These proceeds of crime have to enter the financial system by some means so that it can be converted into a form which can be more easily transformed, concealed or transported. The methods of achieving this are limited only by the ingenuity of the launderer and these methods have become increasingly sophisticated. Despite the variety of methods employed, money laundering is not a single act but a process accomplished in 3 basic stages which are as follows: Placement - the physical disposal of the initial proceeds derived from illegal activity. Layering - separating illicit proceeds from their source by creating complex layers of financial transactions designed to disguise the audit trail and provide anonymity. Integration - the provision of apparent legitimacy to wealth derived criminally. If the layering process has succeeded, integration schemes place the laundered proceeds back into the economy in such a way that they re-enter the financial system appearing as normal business funds. 4

9 The three basic steps may occur as separate and distinct phases. These steps may comprise numerous transactions by the launderers that could alert a financial institution to criminal activity. They may also occur simultaneously or, more commonly, may overlap. How the basic steps are used depends on the available laundering mechanisms and the requirements of the criminal organisations. 1.6 DEFINING 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 International Convention for the Suppression of the Financing of Terrorism (1999) under the United Nations defines TF in the following manner: 1. 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: a. An act which constitutes an offence within the scope of and as defined in one of the treaties listed in the link given below; or b. 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. 2. For an act to constitute an offense set forth in the preceding paragraph 1, it shall not be necessary that the funds were actually used to carry out an offense referred to in said paragraph 1, subparagraph (a) or (b) 2. According to the article 7 of the Anti Terrorism (Amendment) Act, 2012 of Bangladesh, financing of terrorism means: Offences relating to financing terrorist activities. (1) If any person or entity knowingly provides or expresses the intention to provide money, services, material support or any other property to another person or entity and where there are reasonable grounds to believe that the same have been used or may be used in full or partially for any purpose by a terrorist person, entity or group or organization, he or the said entity shall be deemed to have committed the offence of financing terrorist activities. (2) If any person or entity knowingly receives money, services, material support or any other property from another person or entity and where there are reasonable grounds to believe that the same have been used or may be used in full of partially for any purpose by a terrorist person or entity or group or organization, he or the said entity shall be deemed to have committed the offence of financing terrorist activities. (3) If any person or entity knowingly makes arrangement for money, services, material support or any other property for another person or entity where there are reasonable grounds to believe that the same have been used or may be used in full or partially for any purpose by 2 International Convention for the Suppression of the Financing of Terrorism (1999), Article 2, The treaties referred to annex in sub-paragraph 1(a) shall be available in this web link. 5

10 a terrorist person or entity or group or organization, he or the said entity shall be deemed to have committed the offence of financing terrorist activities. (4) If any person or entity knowingly instigates another person or entity to provide or receive or make arrangement for money, services, material support or any other property in such a manner where there are reasonable grounds to believe that the same have been used or may be used in full or partially by a terrorist person or entity or group or organization for any purpose, he or the said entity shall be deemed to have committed the offence of financing terrorist activities. 1.7 THE LINK BETWEEN MONEY LAUNDERING AND TERRORIST FINANCING The techniques used to launder money are essentially the same as those used to conceal the sources of, and uses for, terrorist financing. But funds used to support terrorism may originate from legitimate sources, criminal activities, or both. Nonetheless, disguising the source of terrorist financing, 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 may originate from legitimate sources as well as criminal activities. Such legitimate sources may include donations or gifts of cash or other assets to organizations, such as foundations or charities that, in turn, are utilized to support terrorist activities or terrorist organizations. 1.8 HOW TO COMBAT MONEY LAUNDERING AND TERRORIST FINANCING One of the best methods of preventing and deterring money laundering and terrorist financing is a sound knowledge of a customer s business and pattern of financial transactions and commitments. The adoption of know your customer is not only a principle of good business but is also an essential tool to avoid involvement in money laundering. In complying with the requirements of the Act and in following the Guidelines the branches should at all times pay particular attention to the fundamental principle of good business practice know your customer. 6

11 CHAPTER 2: PRODUCTS OF EXIM BANK Different modes of Deposit of Exim Bank 1. Al-Wadeeah Current Deposit 2. Mudaraba Savings Deposit Mudaraba Savings Deposit Mudaraba Savings Deposit (Staff) Mudaraba Savings Deposit (Special) Mudaraba Savings Deposit (Slab) 3. Mudaraba Special Notice Deposit (MSND) Mudaraba Special Notice Deposit 4. Mudaraba Term Deposit Mudaraba Term Deposit 1Month Mudaraba Term Deposit 3 Months Mudaraba Term Deposit 6 Months Mudaraba Term Deposit 12 Months Mudaraba Term Deposit 24 Months Mudaraba Term Deposit 36 Months 5. Mudaraba Monthly Savings Deposit Scheme Mudaraba Monthly Savings Deposit Scheme 5 Years Mudaraba Monthly Savings Deposit Scheme 8 Years Mudaraba Monthly Savings Deposit Scheme 10 Years Mudaraba Monthly Savings Deposit Scheme 12 Years 6. Mudaraba Monthly Income Deposit Scheme (MMIDS) Mudaraba Monthly Income Deposit Scheme 1 Year Mudaraba Monthly Income Deposit Scheme 3 Years 7. Mudaraba Super Savings Deposit Scheme Mudaraba Super Savings Scheme 6 Years 8. Mudaraba Multiplus Savings Deposit Scheme Mudaraba Multiplus Savings Deposit Scheme 10 Years 9. Mudaraba Exim Student Savers Mudaraba Student Savings Deposit Account Mudaraba Monthly Student Savings Scheme 10. Mudaraba Cash Waqf Deposit Mudaraba Cash Waqf Deposit Account 11. Mudaraba Hajj Deposit Scheme Mudaraba Hajj Deposit Scheme 5 Years Mudaraba Hajj Deposit Scheme 8 Years Mudaraba Hajj Deposit Scheme 10 Years Mudaraba Hajj Deposit Scheme 15 Years Mudaraba Hajj Deposit Scheme 20 Years 12. Mudaraba Denmohor/Marriage Deposit Scheme Mudaraba Denmohor/Marriage Deposit Scheme 3 Years Mudaraba Denmohor/Marriage Deposit Scheme 5 Years Mudaraba Denmohor/Marriage Deposit Scheme 8 Years Mudaraba Denmohor/Marriage Deposit Scheme 10 Years Mudaraba Denmohor/Marriage Deposit Scheme 12 Years Mudaraba Denmohor/Marriage Deposit Scheme 20 Years 7

12 1. Al-Wadeeah Current Deposit Account Al-Wadeeah Current Deposit Account is a mode of deposit A/c of EXIM bank under which deposit is received on Al-Wadeeah Principle. This means that the clients permit EXIM Bank to utilize the fund at Bank s will. It is a transactional mode of deposit Account. Under this deposit Account, client is allowed to deposit/withdraw any amount of money at any time. No profit is allowed for the Account. Main features: a. The account may be opened with a minimum amount of Tk b. Under this mode of deposit Account Bank is allowed by the depositors to utilize the fund at Bank s will. c. The weightage of the account is zero. No profit is allowed for this mode of deposit Account. d. Bank may refuse to process any transaction to any account if Bank suspects fraud or illegality therein. e. If such type of deposit Account remains inoperative for 01(One) year it will be treated as Dormant Account. 2. Mudaraba Savings Deposit Mudaraba Savings Deposit Account is a mode of deposit Account, which is operated under Mudaraba Principle. Under this mode of deposit A/c the clients can deposit money at any time but can withdraw their deposited money under certain conditions if they would like to get profit on the MSD accounts. Main features: a. The account may be opened with a minimum deposit of Tk b. Cheque Book is allowed in favor of the client while minimum balance Tk remains in the account. c. The weightage of the Mudaraba Deposit A/c is d. If such type of deposit Account remains inoperative for 02(Two) years it will be treated as Dormant Account. e. Govt. tax deduction is applicable. 3. Mudaraba Special Notice Deposit (MSND) It is a mode of Deposit Account under which the client can withdraw money on short notice. Normally the client will have to inform the Bank before 07(Seven) days for cash withdrawal. It is one kind of transactional mode of deposit Account. Main features: a. The account may be opened with a minimum initial deposit amount of Tk b. Profit under this mode is given on daily basis. c. Weightage of MSND A/c is d. Cheque book is issued on maintenance of required documentary formalities. e. No minimum balance, Incidental charge, Ledger Fee or Service charge will be applicable. Only A/c maintenance fee and A/c closing fee will be applicable. f. Govt. tax deduction is applicable. 4. Mudaraba Term Deposit Mudaraba Term Deposit Account is a non-transactional mode of deposit account, which offers profit with principal amount at a provisional rate of profit at maturity. This account may be continued on roll over basis until the customer confirms its closure. Main features: a. The account may be opened with a minimum amount of Tk or its above but multiple of Tk b. The tenure of Mudaraba Term Deposit Receipt Account will be 1, 3, 6, 12, 24 and 36 months. c. The account maybe opened at any day of the month. d. Provisional rate of profit for different tenures changes from time to time by Bank Management. e. In case of death of account holder(s), the nominee(s) may continue the account till maturity. f. Weightage of profit increases with the increase of tenure such as weightage for 1 month, 3 months, 6 months, 12 months, 24 months & 36 months are 0.83, 0.88, 0.92, 0.96, 0.98 and 1.00 respectively. g. One or more account(s) can be opened in the same name at the same branch of the Bank. h. Government Tax will be from the profit accrued there on. 8

13 i. In case of lost of MTD Receipt, Bank must be informed by account holder without delay and account holder may be allowed a duplicate receipt of the same subject to submission of an indemnity bond and maintenance due formalities. 5. Mudaraba Monthly Savings Deposit Scheme Mudaraba Monthly Savings Deposit Scheme is a mode of deposit scheme based on Islamic Shariah principles for mobilizing fund from the interested depositors where people can deposit money on monthly installment basis for a stipulated period of time and withdraw the deposited principal amount with profit at maturity. The product has been designed to inspire the clients for building savings on long term basis under Islamic Shariah principles. Main features: a. The account may be opened with a minimum amount of Tk or its multiple. b. The tenure of Mudaraba Monthly Savings Deposit Scheme may be as 5, 8, 10 and 12 years. The depositor has the option to choose any of the tenure at the time of opening the account. c. Once any of the mentioned tenures has been chosen it cannot be changed afterwards during its period. d. One or more account(s) can be opened in the same name at the same branch of the bank. e. The weightage for 5, 8, 10 and 12 years are 1.16, 1.17, 1.18 and 1.19 respectively. f. The depositor (except minor) can avail investment facility upto 90% of deposited amount after completion of 03 (three) years subject to application of terms & conditions of investment policy of the bank. 6. Mudaraba Monthly Income Deposit Scheme (MMIDS) Mudaraba Monthly Income Deposit Scheme is a special Mode of Deposit Scheme which provides an unique opportunity to the clients for getting monthly profit/benefits from the deposited amount kept for a fixed period of time i.e. 01(One) year. Any adult person (individually or jointly) having sound mind or any institution/organization can open a Mudaraba Monthly Income Deposit Scheme (MMIDS) Account with any branch of the Bank. Main features: a. Any customer can open the account with a minimum deposit of Tk.25, b. The tenure of the product is 01(One) Year. c. The account will be accompanied by a MSD A/c at which the monthly profit will be credited. d. The Weightage for deposit of Mudaraba Monthly Income Deposit Scheme is e. Normally, deposited amount of MMIDS Account is not encashable before maturity. If any depositor intends to encash his/her receipt before maturity due to certain unavoidable circumstances, the following terms & conditions will come into force: i. No profit shall be allowed for premature encashment within 01 (one) year. ii. Profit shall be allowed at the provisional rate of Mudaraba Savings Deposit Account % if it is encashed before maturity. f. Investment may be allowed up-to 80% of the deposited amount at the request of the client under the terms & conditions of the Investment Policy of the Bank. 7. Mudaraba Super Savings Deposit Scheme Mudaraba Super Savings Deposit Scheme is a type of deposit account where the clients get the option to turn their deposit into double after a certain period of time. This product is also denoted as Double benefit Scheme. In a nutshell, under this mode of deposit principal amount of deposit becomes double after 06(six) years. Main features: a. Any client can open the account with a minimum deposit of Tk.5, and its multiple amount. b. The tenure of the product is 06(Six) Years. c. The Weightage for deposit of Mudaraba Super Savings Deposit Scheme is d. Normally, deposited amount of Mudaraba Super Savings Deposit Scheme (MSSDS) Account is not encashable before maturity. If any depositor intends to encash his/her receipt before maturity due to certain unavoidable circumstances, the following terms & conditions will come into force: i. No profit shall be allowed for premature encashment within 01 (one) year. ii. Profit shall be allowed at the provisional rate of Mudaraba Savings Deposit Account+ 0.75% if it is encashed after 01 (one) year but before maturity. iii. Profit shall be allowed at the provisional rate of Mudaraba Savings Deposit Account % if it is encashed after 03 (three) years but before maturity. 9

14 e. Investment may be allowed up-to 90% of the deposited amount at the request of the client under the terms & conditions of the Investment Policy of the Bank. 8. Mudaraba Multiplus Savings Deposit Scheme Mudaraba Multiplus Savings Deposit Scheme Account is also a fabulous beneficial mode of deposit A/c under which client gets opportunity to make their deposit triple after a certain period (at present it is 10 years). Main features: a. Any client can open the account with a minimum deposit of Tk.5, and its multiple amount. b. The Weightage for the Deposit A/C is c. Normally, deposited amount of Mudaraba Multiplus Savings Deposit Scheme Account is not encashable before maturity. If any depositor intends to encash his/her receipt before maturity due to certain unavoidable circumstances, the following terms & conditions will come into force: i. No profit shall be allowed for premature encashment within 01 (one) year. ii.profit shall be allowed at the provisional rate of Mudaraba Savings Deposit Account+ 0.75% if it is encashed after 01 (one) year but before 03(Three) years. iii.profit shall be allowed at the provisional rate of Mudaraba Savings Deposit Account % if it is encashed after 03 (three) years but before 05(Five) years. iv.if the account is encashed after completing the tenure of Mudaraba Super Savings Deposit Scheme but before maturity, depositor(s) will be entitled to receive full benefit for the completed tenure of Mudaraba Super Savings Deposit Scheme at the provisional rate of profit prescribed there- against. For remaining period, depositor(s) will receive benefit at the provisional rate of profit prescribed for Mudaraba Savings Deposit Account. v.investment may be allowed up-to 90% of the deposited amount at the request of the client under the terms & condition of the Investment Policy of the Bank. 9. Mudaraba Exim Student Savers Under this mode of Deposit Scheme, an account may be opened in the name of any minor student of schools and colleges and the same to be operated by the parents or any legal guardian to deposit their savings at their will. The motto of the product is to educate the young generation on banking, familiarize them with banking transactions and develop a new segment of customers. At the same time it will help the Bank to mobilize low cost deposit from the students and their parents as well. There are two products: i. Mudaraba Student Savings Deposit Account. ii. Mudaraba Monthly Student Savings Scheme Main features: i. Mudaraba Student Savings Deposit Account a. The account may be opened with a minimum amount of Tk b. Remarkable provisional rate of profit. c. No service charge/account maintenance fee. d. Minimum Account Maintenance balance i.e. Tk. 500/-. e. Half-yearly account statement. f. Facility for payment of Tuition Fees through the A/C. g. Debit Card Facility with limited withdrawal. h. Free ATM Cash withdrawal from all ATMs of EXIM Bank. i. Free SMS Banking for statement/balance checking. ii. Mudaraba Monthly Student Savings Scheme a. The account may be opened with a minimum amount of Tk or it s multiple. b. The tenure of Mudaraba Monthly Savings Deposit Scheme may be as 5, 8, 10 and 12 years. The depositor has the option to choose any of the tenure at the time of opening the account. c. Once any of the mentioned tenures has been chosen it cannot be changed afterwards during its period. d. One or more account(s) can be opened in the same name at the same branch of the bank. e. The weightage for 5, 8, 10 and 12 years are 1.16, 1.17, 1.18 and 1.19 respectively. 10. Mudaraba Cash Waqf Deposit Mudaraba Cash Waqf Deposit account is a perpetual savings deposit account based on Islamic Shariah for mobilizing fund from the interested eligible depositors. 10

15 This mode of deposit provides a unique opportunity for the well off and the rich people of the society to invest in different religious, educational and social services. In this case, Bank issues Cash Waqf Certificate to collect funds from the rich and benevolent people of the society and distributes gains of the managed funds to the poor or any allowed sectors. Main features: a. The account may be opened with a minimum amount of Tk and later on Tk.1000 and its multiple amounts can be deposited. b. Specially designed certificate against cash waqf deposit. c. Investment of fund as per Islamic Shariah. d. Option of Standing Instruction for depositing installment(s) from MSD/MSSD Account to complete total committed amount of Waqf by Waqif(s). e. Opportunity for creating Sada ka-e-jaria. f. Opportunity for managing fund by efficient bodies (Bank) even after the death of Waqif(s). g. The Weightage of this account is Mudaraba Hajj Deposit Scheme This is another type of Deposit Account which has been designed to assist the eligible Muslims to perform one of their obligatory responsibilities i.e. Holy Hajj. Any Muslim can deposit money on monthly basis for a period of 5, 8,10,15 or 20 years with a view to performing Holy Hajj in future. If the client is unable to perform Hajj for unavoidable circumstances he/she can withdraw the principal with profit at MSD A/C rate. Main features: a. An adult person having sound mind can open one account only, in his/her single name with any of the branches of the bank. b. The tenure of Mudaraba Hajj Scheme will be 5, 8, 10, 15 and 20 years. The client may choose any tenure and deposit the prescribed monthly installment to perform Hajj in the predetermined year. c. Profit against balance of Mudaraba Hajj Scheme will be credited on daily product basis and it will bear 1.10 profit weightage. d. There will be 12 installments in a year and accordingly 60 installments for 5 years, 120 installments for 10 years and 240 installments for 20 years. e. An employee/staff of Exim Bank is also allowed to open this scheme. f. Incase of death of the client, profit against deposited amount will be allowed to the nominee(s) at the provisional rate of profit prescribed for Mudaraba Savings Account. 12. Mudaraba Denmohor/Marriage Deposit Scheme It is a monthly savings deposit scheme account based on Islamic Shariah for mobilizing fund from the interested eligible depositors. The prime objective of this product is to create savings mentality of certain group of people and to help the people of all religions for arrangement of their marital expenses beforehand as well as to prescribe a simple path to the Muslim for performance of a solemn responsibility of every married male to pay Denmohor to his wife as per Islamic Shariah. Main features: a. The account may be opened with a minimum amount of Tk b. Handsome return at the maturity of scheme. c. Simple path for payment of Denmohor (Mandatory liability for a husband) to the wife. d. No service charge/account maintenance fee. e. Different installment sizes for different earning levels of people. f. Investment of fund as per Islamic Shariah. g. Effective & beneficial way for the guardians to accomplish the marital functions of their dependents smoothly. 11

16 Different modes of Investment of Exim Bank As the Islamic bank, Exim Bank does not directly deal in money. They run business with money. The funds of Exim bank are mainly invested in the following modes: A. Bai Mechanism (Trading Mode) 1. Bai-Muajjal 2. Bai Murabaha 3. Bai-Salam & Parallel Salam 4. Bai-Istisna a & Parallel Istisna a B. Ijara Mechanism (Rental/Leasing Mode) 1. Izara Bil Baia and Izarah Muntahia Bittamleak 2. Hire Purchase under Shirkatul Melk (HPSM) C. Share Mechanism (Equity Based/Partnership Mode) 1. Mudaraba 2. Musharaka D. Others 1. Direct Investment 2. Investment Auctioning 3. Quard and Quard Hassan A. Bai Mechanism (Trading Mode) 1. Bai-Muajjal: "Bai-Muajjal" means sale for which payment is made at a future fixed date or within a fixed period. In short, it is a sale on Credit. It is a contract between a buyer and a seller under which the seller sells certain specific goods (permissible under Shariah and Law of the Country), to the buyer at an agreed fixed price payable at a certain fixed future date in lump sum or within a fixed period by fixed installments. The seller may also sell the goods purchased by him as per order and specification of the buyer. In Bank's perspective, Bai-Muajjal is treated as a contract between the Bank and the Client under which the bank sells to the Client certain specified goods, purchased as per order and specification of the Client at an agreed price payable within a fixed future date in lump sum or by fixed installments. Main features: a. The client offers an order to purchase by the Bank of a particular permissible goods and committing himself to buy the same from the Bank at cost of the goods plus agreed upon profit on Bai-Muajjal mode. b. Spot delivery of the goods and payment is deferred. c. Bank may or may not declare cost of the goods and profit mark-up separately to the client. d. Ownership and possession of the goods is transferred by the Bank to the client before receipt of sale price. e. Bank must deliver the specified goods to the client on specified date and specific place of delivery as per agreement. f. The price of the goods once fixed cannot be further increased. g. Bank may take Guarantee/cash/collateral as security to guarantee the implementation of commitment of the client. Exim Bank s investment heads under Bai-Muajjal Mode: i. Bai-Muajjal (HYPO) ii. Bai-Muajjal (WO) iii. Bai-Muajjal (Share) iv. Bai-Muajjal (FO) v. Bai-Muajjal (PC) vi. Bai-Muajjal (Export) vii. Bai-Muajjal (Kishan) viii. Bai-Muajjal (LDBP Local) ix. Bai-Muajjal (MBD) 12

17 2. Bai-Murabaha: Bai-Murabaha is a contract between a buyer and a seller under which the seller sells certain specific goods permissible under Islamic Shariah and law of the land to the buyer at a price determined by charging agreed profit, margin or mark-up over the cost price. In this case, the buyer either makes cash payment to receive the goods or is allowed to make payment by installments or on a fixed future date. The profit mark-up may be fixed in lump sum or in percentage over the cost price of the goods. Contractual buying and selling at a mark-up profit is called Murabaha. In this case, the client requests the Bank to purchase certain goods for him. Exim Bank purchases the goods as per specification and requirement of the client. The client receives the goods on payment of the price, which includes mark-up profit as per contract. Under this mode of investment the purchase/ cost price and profit are to be disclosed separately. Main features: a. The client offers an order to purchase by the Bank of a particular permissible goods and committing himself to buy the same from the Bank at cost of the goods plus agreed upon profit in cash or on any future date in lump sum or by installments. b. Bank may take Guarantee/cash/collateral as security to guarantee the implementation of commitment of the client. c. Bank must deliver the specified goods to the client on specified date and specific place of delivery as per agreement. d. The price of the goods once fixed cannot be further increased. e. The cost of goods sold and profit mark-up shall separately and clearly be mentioned in the Bai- Murabaha agreement. f. Under no circumstances, the percentage/amount of profit shall have any relation with time or expressed in relation with time. g. For convenient, it is permissible for the Bank to authorize any third party to buy and receive the goods on Bank s behalf i.e. appointment of buying agent. Exim Bank s investment heads under Bai-Murabaha Mode: i. Murabaha (Pledge) ii. Murabaha Import Bill (MIB) iii. Murabaha Post Import (MPI) iv. Murabaha Trust Receipt (MTR) 3. Bai-Salam & Parallel Salam: Bai-Salam: Salam means advance purchase. It is a mode of business under which the buyer pays the price of the goods in advance on the condition that the goods would be supplied / delivered at a particular future time. The seller supplies the goods within the fixed time. Parallel Salam: Parallel Salam is a Salam contract whereby the seller depends, for executing his obligation, on receiving what is due to him - in his capacity as purchaser from a sale in a previous Salam contract, without making the execution of the second Salam contract dependent on the execution of the first one. Main features: a. Salam is a sale/purchase of a deferred commodity against the present price. b. The seller gets in advance the money he wants in exchange of his commitment to deliver the commodity at a definite future date. c. The Bank has also the option of waiting to receive the commodity and then sell it for cash or deferred payment. d. The specification, quality & quantity of the commodity must be determined to avoid any ambiguity. e. Date & place of delivery must be agreed upon but can be changed with mutual consent of the parties. f. In order to ensure that the seller shall deliver the commodity on the agreed date the Bank can ask him to furnish a security. Exim Bank s investment heads under Bai-Salam Mode: Bai Salam (ECC) 13

18 4. Bai-Istisna a & Parallel Istisna a: Bai-Istisna a: A contract executed between a buyer and a seller under which the seller pledges to manufacture and supply certain goods according to specification of the buyer is called Istisna a. An Istisna agreement is executed when a manufacturer or a factory owner accepts a proposal placed to him by a person or an Institution to produce/manufacture certain goods for the latter at a certain negotiated price. Here, the person giving the order is called Mustasni, the receiver of the order is called Sani and the goods manufactured as per order is called Masnu. An order placed for manufacturing or producing those goods, which under prevailing customs and practice are produced or manufactured, will be treated as Istisna contract. Main features: a. The concerned Agreement must contain the details, such as, the type, class, quantity and features of the goods to be produced, so that no misunderstanding is created later on. b. The price has to be settled; payment time/schedule and modes thereof is to be predetermined. c. When, where and on whose cost the goods to be supplied has to be clearly mentioned. d. If agreed by both parties, payment may be made in advance to the seller in part or in full or may be deferred to be paid in due course/agreed time. e. Generally time frame is not mandatory for supplying the goods under Istisna agreement. It may be executed without determining time frame. But in case of bank, time frame for supplying goods must be determined to avoid any dispute in future. f. Condition for imposing stipulated compensation/penalty may be included in the Istisna agreement against the party who breaches the terms of the agreement causing the other party to suffer. But no compensation/penalty would be imposed on any party if it happens for any valid reason or unavoidable circumstances. g. As per opinion of the contemporary jurists, the compensation in case of Istisna may be treated as legal income. Parallel Istisna a: If it is not stipulated in the contract that the seller himself would produce/provide the goods or services, then the seller can enter into another contract with third party for getting the goods or services produced/ provided by the third party. Such a contract is called Parallel Istisna a. This may be treated as a sub-contract. Main features: a. The original Istisna contract remains valid even if the Parallel Istisna contract fails and seller will be legally liable to produce/provide the goods or services mentioned in the Istisna a contract. b. Istisna a and Parallel Istisna contracts are treated as two separate contracts. c. The seller under the Istisna a contract will remain liable for failure of the sub-contract. B. Ijara Mechanism (Rental/Leasing Mode) 1. Ijara Bil Baia & Ijarah Muntahia Bittamleak Ijara Bil Baia: The mode under which any asset owned by the bank, by creation, acquirement/or building-up is rented out is called Ijara or leasing. In this mode, the lessee pays the Bank rents at a determined rate for using the assets/properties and returns the same to the Bank at the expiry of the agreement. The Bank retains absolute ownership of the assets/properties in such a case. However, at the end of the leased period, the asset may be sold to the client at an agreed price. Ijarah Muntahia Bittamleak (Hire Purchase): Under this mode, the bank purchases vehicles, machineries & instruments, building, apartment etc. and allow clients to use those on payment of fixed rents in installments with the ultimate objective to sell the asset to the client at the end of the rental period. The client acquires the ownership/title of the assets/properties subject to full payment/adjustment of all the installments. Main features: a. In Ijara mode, the asset shall be acquired on participation of ownership & rent shall be charged as per equity participation. 14