Bangladesh Bank (BB) has asked Authorized Dealers (ADs) of banks to take appropriate measures to safeguard export trade considering risk factors against cross border transactions.
In the circular on Tuesday, the central bank also instructed ADs to comply with all regulations concerned for maintaining relationships, opening of nostro accounts and transactions with correspondents.
In addition, ADs will have to follow Foreign Exchange Risk Management’ to maintain cross border correspondent banking relationships including observance of applicable extended due diligence and restriction to maintain any correspondent relationship with shell banks.
Instructions of the Bangladesh Financial Intelligence Unit (BFIU) will have to be followed by ADs regarding selection of customers and establishment of correspondent relations with banks abroad. The instructions contained therein restrict to establish and conduct transactions with shell banks.
To ensure safeguards in export trade, ADs need to observe appropriate measures before execution of transactions. ADs shall facilitate export transactions under letters of credit (LCs) routed through authenticated channels from banks with whom appropriate relations are in place, it added.
In addition to be ensured of apparent authenticity of LCs, ADs must satisfy themselves of bonafide of applicant banks/issuing banks in case of LCs received through authenticated channels from third banks. In this case, ADs need to be ensured that applicant banks or issuing banks will receive export documents directly from them or through third banks or other authenticated banks with whom respective ADs maintain appropriate relationships, said the BB.
In case of transferred LCs, ADs must satisfy themselves of bonafide first beneficiary and transferring bank in addition to the LC applicant banks or issuing banks.
ADs must conduct due diligence on importers’ banks designated for the transactions under sales contracts for being ensured of their step by step responsibilities regarding release of export documents by designated banks to importers and procedural arrangement of payment as per the relevant provisions of the Uniform Rules for Collection (URC) in force.
In such cases, ADs need to be ensured that importer’s banks will receive export documents directly from them or through third banks/other authenticated banks with whom respective ADs maintain appropriate relationships.
In case of any difficulties in execution of the instructions mentioned above or there is any doubt regarding the transactions, ADs must guide exporters so that they can take appropriate measures for execution of the transactions such as changing designated banks of importers acceptable to ADs, bringing the transactions under the external payment guarantees.