Regulation No. 001/2023 on the Fight Against Money Laundering and Terrorist Financing

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BANQUE DE LA REPUBLIQUE DU BURUNDI

THE BOARD OF DIRECTORS

REGULATION NO. 001/2023 ISSUED IN APPLICATION OF LAW NO. 1/02 OF 04 FEBRUARY 2008 ON THE FIGHT AGAINST MONEY LAUNDERING AND THE FINANCING OF TERRORISM

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PRESENTATION NOTE

Pursuant to Article 40 of Law No. 1/17 of 22 August 2017 governing banking activities, credit institutions are obligated to refuse the management or transfer of funds related to illegal activities and to put in place an adequate system for detecting and reporting suspicious activities under the conditions set by regulation.

Article 3 of Law No. 1/02 of 04 February 2008 on the fight against money laundering and the financing of terrorism lists the financial institutions authorized under the law governing banking activities, currency exchange offices, microfinance institutions, the National Post Office, and any other person exercising professionally one of the activities covered by the definition of a financial institution as persons subject to the application of this law.

In its capacity as the supervisory and regulatory authority for credit institutions under Law No. 1/34 of 02 December 2008 establishing the Statutes of the Banque de la République du Burundi and in accordance with Article 32 of the aforementioned anti-money laundering law, the BRB is obligated to issue an implementing regulation for this law intended for the establishments subject to it. These establishments must be vigilant so as not to constitute a weak link through which money launderers and terrorists pass their funds.

In addition to this regulatory power, the BRB has, under Article 31 of the anti-money laundering law, the power to sanction establishments under its control in case of violation of the provisions of said law and in case of violation of the regulatory measures it issues.

It is in this regard that the BRB issues this regulation intended for credit institutions (banks and financial establishments), payment establishments, the National Post Office, currency exchange offices, and microfinance institutions.

This regulation comprises, in addition to its twenty-three provisions, two annexes, namely the minimum requirements for customer identification (Annex I) and a typology of suspicious operations requiring particular attention (Annex II).

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[Logo: BRB]

BANQUE DE LA REPUBLIQUE DU BURUNDI

THE BOARD OF DIRECTORS

REGULATION NO. 001/2023 ISSUED IN APPLICATION OF LAW NO. 1/02 OF 04 FEBRUARY 2008 ON THE FIGHT AGAINST MONEY LAUNDERING AND THE FINANCING OF TERRORISM

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The Banque de la République du Burundi,

Having regard to Law No. 1/34 of 02 December 2008 establishing the Statutes of the Banque de la République du Burundi, specifically Articles 7 (paragraph 4), 8, and 21;

Having regard to Law No. 1/02 of 04 February 2008 on the fight against money laundering and the financing of terrorism, specifically Articles 11 and 32;

Having regard to Law No. 1/17 of 22 August 2017 governing banking activities, specifically Article 40;

Having regard to Law No. 1/07 of 11 May 2018 establishing the National Payment System;

Having regard to Law No. 1/05 of 27 February 2019 governing the Burundian capital market;

Having regard to Decree No. 100/044 of 16 March 2020 establishing the missions, organization, and functioning of the National Financial Intelligence Unit, "CNRF";

Hereby issues:

Article 1: Scope of Application

The following are subject to this regulation: credit institutions, the National Post Office, currency exchange offices, payment establishments, and microfinance institutions.

Article 2: Definitions and Acronyms

For the purposes of this regulation, the following terms are defined as:

1. Beneficial Owner: a person to whom the patrimonial values deposited must be attributed, economically speaking.

2. Money Laundering: the process by which a natural or legal person conceals or disguises the nature or origin of the proceeds of illicit activities so that they appear to originate from legitimate sources, notably by:

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a. the conversion, transfer, or disposal of property with full knowledge that such property is the proceeds of an offense, with a view to concealing or disguising the illicit origin of said property, or of assisting any person involved in the commission of the offense to escape the consequences of their action;

b. the acquisition, possession, or use of property knowing, at the time of acquisition, possession, or use, that it is the proceeds of an offense;

c. participation in any of the acts referred to in the two preceding points, association to commit the act, aiding, abetting, instigating, or counseling someone to commit it, or facilitating its execution.

3. CDD: Customer Due Diligence.

4. CNRF: National Financial Intelligence Unit of Burundi.

5. Occasional Client: any client who does not have an account in a subject establishment and who carries out a one-off transaction with said establishment, which takes place in a single or multiple installments appearing to be linked to each other.

6. Subject Establishments: credit institutions, the National Post Office, currency exchange offices, payment establishments, and microfinance institutions.

7. Layering: a method of concealment or disguise aimed at masking the illicit origin of funds. This notably includes the following operations:

a. splitting deposits across multiple accounts and then regrouping them at a few specific banks;

b. succession of financial operations to mask the fraudulent origin: repayment of fictitious loans, payment of false invoices;

c. purchase and resale of goods;

d. international fund transfers.

8. Trust: an operation by which one or more individuals (settlers) transfer assets, rights, or securities, or a set of assets, rights, or securities, present or future, to one or more managers (trustees) who, holding them separate from their own assets, act for a determined purpose for the benefit of one or more other individuals (beneficiaries).

9. Financing of Terrorism: the act of providing, collecting, assembling, or managing, by any means whatsoever, directly or indirectly, funds, securities, or assets with the intention that they be used, or knowing that they will be used, in whole or in part, to commit an act of terrorism, regardless of whether such an act occurs.

10. FATF: Financial Action Task Force, the global supervisory body for money laundering and terrorist financing, which defines international standards aimed at preventing these illegal activities.

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11. Integration: the introduction of laundered sums into legal economic circuits to give them a lawful appearance. This may notably include:

a. investments in real estate;

b. creation and buyouts of companies;

c. stock market placements.

12. KYC: Know Your Customer (Customer identification obligation).

13. AML/CFT: Anti-Money Laundering and Countering the Financing of Terrorism.

14. High-Risk and/or Non-Cooperative Countries: countries identified by the FATF as having strategic deficiencies in AML/CFT, which have not made sufficient progress or are not committed to following an action plan developed with the FATF to remedy their deficiencies.

15. Politically Exposed Person (PEP): any person who exercises or has exercised important public functions in Burundi or in a foreign country, Head of State or Government, member of the Government, high-ranking politician, exercising or having exercised responsibilities at the national level and/or at the level of a political party or international organization, civil servant with a rank equal to or higher than Department Director, Director of a public enterprise, magistrate, and senior officer of the army and police.

16. Illicit Placement: conversion of cash sums from trafficking or illicit activities by their introduction into the banking system or the economic circuit, notably cash deposits into bank accounts or the acquisition of prepaid payment cards.

17. International Standards: notably the recommendations of the Financial Action Task Force (FATF).

18. Significant Transaction: any operation with an amount equal to or greater than twenty million Burundi Francs (BIF 20,000,000) or equivalent in foreign currencies.

Article 3: Object of the Regulation

This regulation is issued to:

1. require subject establishments to establish and maintain specific policies, procedures, and tools to protect against the use of the financial system for money laundering and terrorist financing;

2. instruct subject establishments to identify suspicious transactions, document them, and transmit reports and information on these suspicious transactions to the competent authority;

3. promote transparency in financial transactions.

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Article 4: Development of AML/CFT Strategies

Every subject establishment is obligated to develop AML/CFT strategies.

The strategies referred to in the preceding paragraph must include:

1. internal controls, policies, and procedures, including the designation of responsible persons within the subject establishment;

2. "KYC/CDD" customer knowledge rules and procedures;

3. maintenance of files related to suspicious cases;

4. identification and reporting of suspicious transactions; and

5. awareness-raising and training of relevant employees.

Article 5: Customer Identification

Subject establishments must put in place internal rules and procedures to identify their clients, including occasional clients, as well as, where applicable, their beneficial owners in the situations provided for in Articles 4, 5, and 6 of the AML/CFT Law.

Customer identification entails, for a subject establishment, the obligation to:

1. ensure permanent knowledge of its client using documents, data, and information from reliable and independent sources to detect abnormal or suspicious operations;

2. discover the beneficial owner of the opened account and take necessary measures to verify their identity;

3. perform enhanced control in the context of politically exposed persons;

4. reinforce normal vigilance measures in situations of cross-border correspondent banking relationships;

5. in the case of a banking relationship with an individual or entity, thoroughly verify their relationship with persons/entities involved in money laundering/terrorist financing or if the entity or individual does not appear on sanctions lists published notably by the United Nations.

The above verifications must be carried out upon entering into the relationship as well as during the continuation of the relationship.

The opening of accounts without expressly designated holders is prohibited.

Article 6: Identification Elements

For natural and legal persons, the documents required for their identification are detailed in Annex I of this regulation.

For trusts, subject establishments must compile files comprising a document justifying the distribution of rights on the capital.

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For occasional clients, their identification is done by carrying out verifications analogous to those required for natural persons for any transaction equal to or greater than twenty million Burundi Francs (BIF 20,000,000).

However, even if the amount is below this threshold, the same identification is required when the lawful origin of the funds is not certain and when the operation presents itself under unusual conditions or in case of repetition of distinct operations carried out in close periods.

Article 7: Operation Performed on Behalf of Another

In the event that the client does not appear to be acting for their own account, the subject establishment must inquire, by all means, about the identity of the person on whose behalf they are acting.

After verification, if doubt persists regarding the identity of the beneficial owner, it must terminate the banking relationship and, where applicable, proceed, under the conditions provided for in Articles 16 and 17 of the AML/CFT Law, to file a suspicion report with the CNRF.

Article 8: Remote Operations

When a subject establishment offers the possibility of opening an account or carrying out any other operation remotely, it must put in place adapted measures to guarantee customer identification.

These measures must, notably, provide for the authentication of presented identification documents, the request for additional documents, the possibility of independent verification of the client's situation by a third party of confirmed reputation, the requirement of a first payment through an account opened in the client's name with an institution subject to international AML/CFT standards, or the sending of a registered letter to the client's address.

Article 9: Use of Third Parties for Customer Identification

Subject establishments may resort to third parties to ensure the identification of some of their clients. In all cases, they retain responsibility for the identification of their clientele.

In this regard:

1. The third party must be subject to AML/CFT regulation and supervision at least equivalent to that of the subject establishment and effectively apply it;

2. It must transmit the identification elements provided for in the previous Article 7 within reasonable timeframes and, in any case, before the account records any operations.

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Article 10: Recording of Identification Evidence

A subject establishment must require and record proof of the identity of its regular or occasional clients when entering into a business relationship with them or when carrying out transactions, particularly at account opening or issuance of checkbooks, at the time of safe deposit box rental, or during significant cash transactions.

For the purposes of the requirement in the preceding paragraph, proof of identity must be considered satisfactory if:

1. it is reasonable in measure to establish that the requesting client is the person they claim to be;

2. it is presented under conditions conforming to those described in Annex I of this regulation.

Article 11: Retention of Customer Identification Files

A subject establishment must, in accordance with Articles 8 and 9 of Law No. 1/02 of 04 February 2008 on AML/CFT, keep files used for customer identification for a period of at least 10 years after ending relations with their clients to be able to respond to requests from competent authorities.

The files referred to in the preceding paragraph must be kept in a form deemed sufficient, including in electronic file format, to allow the reconstruction of the history of individual transactions, including amounts and currencies involved, where applicable, in order to provide evidence for potential criminal proceedings.

Article 12: Examination of Unusual Transactions

A subject establishment must examine and properly document the history and purpose of all operations that present themselves under unusual conditions, when they have no apparent legitimate economic purpose.

Article 13: Control of Payment Means and Instruments

Subject establishments must put in place procedures for controlling payment means and instruments.

Article 14: Reporting of Suspicious Transactions

A subject establishment must report without delay any suspicion of money laundering or terrorist financing related to a client or any account held with said establishment to the CNRF.

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A subject establishment must report as suspicious, notably, the following transactions:

1. fund transfers abroad without visible legitimate purpose;

2. fund transfers domestically without visible legitimate purpose or which do not underlie justified transactions;

3. unusual purchases of foreign currencies without visible legitimate purpose;

4. unusual purchases of foreign currencies whose source of financing is not established transparently;

5. significant cash transactions that are visibly complex and unusual, as well as all types of unusual transactions, when they have no visible legitimate purpose;

6. any other operation that the establishment considers suspicious.

Acts likely to constitute suspicious operations are listed in Annex II of this regulation. The list of operations enumerated in this annex is not exhaustive and gives only examples of the most elementary means of money laundering.

Article 15: Obligation of Secrecy

It is prohibited for the subject establishment, its directors, managers, and employees to warn its clients when information regarding a suspicious transaction concerning them is communicated to the CNRF.

Article 16: Relations with Foreign Persons

The subject establishment must exercise the utmost caution in its transactions with persons, companies, and financial institutions from foreign countries, especially high-risk and/or non-cooperative countries.

Article 17: Branches and Subsidiaries

Every subject establishment must ensure that customer knowledge rules and procedures and AML/CFT strategies are also applied within its branches and subsidiaries, particularly for those operating in countries that are not, or are insufficiently equipped with, anti-money laundering and counter-terrorist financing regulation.

Article 18: Designation of a Money Laundering and Terrorist Financing Prevention Officer

Subject establishments must designate one or more person(s) responsible for the prevention of money laundering and terrorist financing within their organization.

The Central Bank and the CNRF must be informed of their appointment.

When a subject establishment has subsidiaries or branches, it must designate a competent AML/CFT officer for the entire group.

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The money laundering and terrorist financing prevention officers are charged with ensuring the consistency and effectiveness of the money laundering and terrorist financing prevention system. They are, in particular, charged with:

1. transmitting reports to the CNRF;

2. establishing applicable policies and procedures and internal controls to be conducted;

3. monitoring operations considered atypical;

4. centralizing information to identify and prevent the realization of operations related to money laundering and terrorist financing;

5. regularly informing management about suspected and/or higher-risk clients;

6. ensuring that all relevant agents possess the required knowledge to exercise appropriate vigilance;

7. managing relations between subject establishments, the Central Bank, and the CNRF.

Article 19: Criteria for Designation of the Money Laundering and Terrorist Financing Prevention Officer

The person(s) responsible for the prevention of money laundering and terrorist financing are designated taking into account criteria, notably, of honorability, professional experience, and moral integrity.

The money laundering and terrorist financing prevention officers must be invested with the adequate hierarchical level and possess the means and independence necessary for the exercise of the missions assigned to them.

To this end, the officers and their collaborators must have access to all information they deem necessary for the exercise of their missions. Their attributions must be precisely formalized.

Article 20: Staff Awareness and Training

Every subject establishment must take appropriate measures to:

1. inform its employees of the policies and procedures put in place to prevent money laundering and terrorist financing, including those put in place for customer identification, file maintenance, and internal reporting;

2. provide training, at least annually, to all personnel responsible for executing various transactions on the general appreciation of detecting money laundering and terrorist financing and on the mandatory reporting of any suspicious transaction.

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Article 21: Administrative Sanctions

Without prejudice to the monetary sanctions provided for in Article 31 of the AML/CFT Law, the Central Bank may impose all or part of the administrative sanctions provided for by the law governing banking activities and its implementing texts on a subject establishment or an administrator or manager who contravenes the provisions of this regulation.

Article 22: Transitional Provision

Subject establishments must, within a period of twelve (12) months from the entry into force of this regulation, update the files related to the identification of their clients.

Article 23: Entry into Force

This regulation enters into force on the day of its publication on the website of the Central Bank and in the Official Bulletin of Burundi.

Done in Bujumbura, on 28/04/2023

Dieudonné MURENGERANTWARI
Governor. - [Signature]

[Stamp: BANQUE DE LA REPUBLIQUE DU BURUNDI - Governor - BURUNDI]

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ANNEX II

TYPOLOGY OF SUSPICIOUS OPERATIONS

In general, operations initiated by clients present money laundering and terrorist financing risks when:

1. their mention is suspicious;
2. their economic purpose is not recognizable;
3. their purpose appears absurd from an economic point of view (operations generally at a loss);
4. patrimonial values are withdrawn immediately after being credited to accounts (pass-through accounts), provided that the client's activity does not make such immediate withdrawal plausible;
5. they fall outside usual activities or the circle of usual clients of a bank or agency and one cannot understand the reasons why the client chose precisely this bank or this agency to conduct their business;
6. they result in an account, previously largely inactive, becoming very active without one being able to perceive a plausible reason;
7. a client provides false or misleading information to the financial intermediary or, without plausible reason, refuses to provide the information and documents necessary, admitted by the usages of the concerned activity.

Subject establishments are particularly required to monitor op