Identity Verification, KYC, and AML Compliance in Bangladesh

Key takeaways
 

Bangladesh is strengthening its KYC and AML legal framework, aligning with FATF recommendations to prevent money laundering and financial fraud.

Companies face significant challenges in identity verification due to the variety and lack of standardization of official documents such as the National ID and passport.

Didit offers an innovative, free solution for document verification and facial recognition, streamlining KYC and AML compliance in Bangladesh.

By implementing advanced technologies, Didit improves accuracy and efficiency in identity verification, helping businesses overcome regulatory and security obstacles.

Bangladesh stands at the economic heart of South Asia. However, the country is also at the forefront of the fight against money laundering and financial fraud. This challenge, combined with the digital transformation of its economy, places Bangladesh at a regulatory turning point that can prove challenging for financial institutions and identity verification companies.

Here, the Financial Action Task Force (FATF) has turned its attention to the country. While it’s true that the organization recognizes Bangladesh’s progress on compliance, it also points out several deficiencies still awaiting resolution. For regulators, the real difficulty lies not so much in creating the regulations, but in implementing them within a rapidly evolving financial system.

In any case, identity verification and KYC processes play a crucial role in the fight against money laundering in Bangladesh, as they do in practically every country. However, there is still much work to do regarding KYC and AML: traditional transfer systems such as the “hundi” remain in use, posing a real challenge for compliance professionals in the country.

The legal framework for KYC and AML in Bangladesh: regulatory requirements

Bangladesh still has a great deal of work ahead on KYC and AML to gain the green light from the Financial Action Task Force. Nonetheless, the South Asian country has made strides in preventing money laundering, as the FATF has acknowledged in some communications.

Regulations on identity verification and the fight against money laundering are designed to strengthen transparency and protect the financial system from any illicit economic activities.

The Anti-Money Laundering Prevention and Control Act (MLPA) of 2012

The Anti-Money Laundering Prevention and Control Act lays the groundwork for money laundering prevention in Bangladesh, imposing obligations on financial institutions and identifying other industries that must detect and report suspicious activities.

Bangladesh Central Bank KYC Regulation (2020)

Issued by the Central Bank, this regulation specifies the KYC requirements that financial institutions and other obligated entities in the country must comply with, including identity verification and customer due diligence.

Electronic Transfer Tax Authority Guidelines (2021)

These guidelines expand AML regulations, mainly focusing on electronic transactions. They establish protocols for monitoring and reporting suspicious or unusual financial movements.

Identity verification in Bangladesh: a challenge for companies

Businesses that must verify the identity of their users in Bangladesh face a number of challenges. The main ones stem from the significant variety of official documents in the country, each with different formats and security technologies. The fact that these documents are still not standardized according to the International Civil Aviation Organization (ICAO) guidelines, a process currently underway, adds even more complexity to identity verification in the country.

In fact, identity fraud is all too common. The inconsistencies in traditional documentation, combined with less sophisticated identity verification systems, put Bangladesh at the top of the list of countries most vulnerable to identity theft (5.44%), according to some recent reports.

The challenges in document verification in Bangladesh

Document verification thus presents a formidable obstacle for many KYC service providers. What are the main challenges?

• Lack of document standardization. Not all official documents share consistent sizes and formats, making automated verification difficult.
• Variety of documents. Numerous documents are accepted for KYC processes, though the most important are the National ID, passport, and driving license.
• Lack of unified security measures. While more and more documents now incorporate RFID and NFC chips to provide additional security, not all include this anti-fraud measure.
• Document quality. Document quality and legibility can vary, so it’s crucial that verification tools are accurate when handling these materials.

Key documents in Bangladesh: National ID, passport, and driving license

In Bangladesh, the three most common documents for identity verification are, as mentioned, the National ID, passport, and driving license.

National Identification Card (NID) 

The National Identification Card, or NID, is the primary document containing essential personal information. Issued by the local government, it is a plastic card with an embedded chip, similar to a credit card. It includes fingerprints from all fingers and a digital photograph.

Passport 

The passport is primarily used for international transactions and identity checks in global contexts. It comes in a hardcover format with security pages and an electronic chip containing stored biometric data.

Additionally, there are three types of passports in Bangladesh: the ordinary passport, the diplomatic passport, and the official passport.

Driving license 

Though less formal, the driver’s license can also be used for certain identity verification processes in Bangladesh. It comes in a plastic card format with an integrated chip, featuring a duplicate photograph on both the chip and the card surface to enhance security. The country offers two types of driver’s licenses: professional and non-professional.

Didit: Transforming identity verification and KYC/AML compliance in Bangladesh

Amid document fragmentation and identity fraud risks, Didit stands out as a solution for identity verification in Bangladesh. We are the first and only tool in the market to offer unlimited, free identity verification, helping companies comply with KYC and AML regulations in the country.

Wondering how we can provide free KYC? Our CEO, Alberto Rosas, explains in this blog article.

How does Didit’s technology work?

• Document verification: We use custom algorithms to validate documents from over 220 countries and territories, ensuring authenticity and integrity, while precisely extracting information and adjusting to Bangladesh’s unique documentation.
• Facial recognition: We use AI models that go beyond a simple photo comparison. We offer both passive and active facial recognition models to ensure the person identifying themselves is indeed who they claim to be.
• AML Screening (optional): We perform real-time checks against more than 250 global data sets, covering over one million entities on watchlists. This process enables obligated businesses to meet local legal requirements and comply with the guidelines set by the Central Bank of Bangladesh.

Which official documents does Didit verify in Bangladesh?

Didit can verify the most commonly used documents for identification and regulatory compliance. These include:

• National ID
• Passport
• Driver’s license

By partnering with Didit, you can revolutionize your KYC and AML processes in Bangladesh. The future is all about free KYC. Are you ready to take the leap?

Welcome to the new era of regulatory compliance in Bangladesh.