With the aim of reducing unofficial offshore remittances and to provide a legal framework for such activities, the Central Bank of Myanmar (“CBM”) issued Notification No. 21/2019 regarding offshore remittance business license regulations on 15 November 2019 (“ORBLR”). The ORBLR embodies important provisions such as the application process for an offshore remittance business license (“ORBL”), rules on security deposits and revolving funds, terms and conditions for an ORBL, limitations on transferable amounts, compliance with anti-money laundering legislation and penalties for non-compliance.
Generally, an ORBL application must be accompanied by supporting evidence relating to the entity and those directing its activities. These supporting documents include but are not limited to:
- Certificate of incorporation (“COI”) under the Myanmar Companies Law 2017 (“MCL”);
- Tax clearance certificates and invoices attesting to official sources of income for the company’s security deposit;
- Business operation plan;
- Cash distribution program to be opted into within Myanmar;
- An undertaking by the company to comply with the Foreign Exchange Management Law, the Financial Institutions Law, the
- Anti-money Laundering Law, and the Anti-terrorism Law; and
- Customer complaint program and accounting scheme.
Supporting documents relating to the entity’s responsible persons include but are not limited to:
- Names, working experience and fields of expertise of the responsible persons who will manage the offshore remittance business (“ORB”), beneficial owner(s), management personnel, shareholders and compliance officers;
- A police clearance certificate for compliance officers, agents, sub-agents or officers-in-charge of such branch offices and shareholders holding 10% or more in the ORB; and
- A training course completion certificate for compliance with the Anti-money Laundering Law and Anti-terrorism Law provisions conducted by the Financial Intelligence Unit in collaboration with the Myanmar Police Force, Special Investigation Department, the CBM and Rule of Law Centers.
Review and approval of the ORBL application by the CBM will take 90 days under the ORBLR’s provisions. The ORBL will be valid for three years. The maximum level of funds receivable or transferable by the ORB licensee on behalf of an individual customer at a given time will be USD 1,000. The maximum receivable or transferrable amount for one person per month will be equivalent to USD 5,000. The ORB may only accept funds at its official location(s) in Myanmar for the purpose of facilitating inward or outward foreign remittances. Remittances received by the ORB from overseas can only be issued within the country when denominated in Myanmar kyats (“MMK”).
As a prerequisite to conducting its activities, ORBs must lodge a minimum MMK 100 million security deposit at a bank holding an authorized dealer license issued by the CBM. This security deposit must be lodged in an escrow account (“EA”) that can only be opened by the ORB upon entering into an agreement which among other conditions stipulates that the ORB can only make withdrawals from the EA with prior CBM approval. The CBM may set a higher minimum security deposit level for large ORBs under the ORBLR. A separate account purely for revolving funds (“RF Account”) for operation of the ORB licensee shall also be opened with a banks holding authorized dealer licenses. More than one RF Account can be opened but bank statements for each must be submitted to the CBM.
From a compliance perspective, ORBL holders must abide by the following:
- Monthly submission of bank statements of agents or offshore branch offices that receive or transfer funds to the Foreign Exchange Management Department (“FEMD”);
- Submission of Consolidated Remittance Transaction Statements (“CRTS”) signed by an authorized representative of the company to the FRMD within seven days after the end of each month;
- Submission of Financial Statements (“FS”) signed by an authorized representative of the company to the FEMD within one month after the end of the financial year;
- Submission of foreign currency transaction daily accounts to the FEMD using the Electronic Reporting System (“ERS”) before noon of the next working day;
- Submission of the final status or information regarding an ORBL Holder’s business operations (such as ongoing litigation, being convicted of a crime, death etc.) to the CBM once every six months;
- In the event that the MMK denominated amount transferred is equivalent to USD 500 or below, names and national registration card numbers or passport numbers of the transferor and transferee must be maintained for one year from the date of such a transfer;
- If the MMK denominated amount transferred exceeds USD 500, information relating to the transfer, such as transferor and transferee names must be maintained for five years from the date of the transfer;
- The place of business must be notified to the CBM before commencing operations and 30 days’ prior approval from the CBM must be obtained for a change of business location;
- An accountant for the ORB is to be appointed and accounts must be maintained in line with Myanmar accounting standards. Furthermore, an external auditor shall be appointed who must prepare an annual report for the relevant financial year. This report must be submitted to the CBM within three months after the end of the financial year;
- If an ORBL holder under ORBLR has a similar offshore remittance business license issued by any other country, then the document verifying the same must be submitted to the CBM;
- In respect of compliance with combatting money laundering and terrorism, the ORB must form a department, adopt relevant procedures in this regard and appoint a staff member to implement them. This department must observe and record, on a quarterly basis, any suspicious transfers that may indicate money laundering and/or the financing of terrorism. These reports must be submitted to the FEMD under the Anti-money Laundering Regulations. Records of such reports have to be maintained for at least five years and must be produced upon request by the institutions on rule of law; and
- ORBL holders shall check the names of transferors and transferees on the CBM’s website (https://www.cbm.gov.mm/?q=node/273), the United Nations Security Council Consolidated List uploaded on the United Nation Security Council’s website (https://www.un.org/securitycouncil/content/un-sc-consolidated-list), the List of Terrorists and Terrorist Organizations provided by the Counter-Terrorism Center, and the black list occasionally issued by the CBM. Upon discovering such fund transfers after inspection, they must be frozen and this has to be notified to the Counter-Terrorism Center, FIU, and the CBM.
The FEMD is the designated department to supervise and take action on ORBs. In terms of general penalties for non-compliance, a minimum MMK 10 million fine may be imposed on ORBL holders.
The issuance of this Notification by the CBM is a positive step towards easing the burden on banks in dealing with small inbound and outbound remittances. This Notification aims to regulate an already existing practice which had the potential of being abused and/or used to serve nefarious purposes. Thus, it can be said that the Notification goes some way toward eliminating the grey area in which such transactions typically occurred and establishes a clearer legal framework in which such activities may take place from now on.
The information provided in this email is for information purposes only, and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.
Deputy Managing Director
Head of Banking & Finance Practice
Partner & Managing Director