On October 21, 2022, the Financial Action Task Force (FATF) added Myanmar to the list of high-risk jurisdictions having significant deficiencies to counter money laundering, terrorist financing, and financing of proliferation. The FATF is an international financial watchdog that aims to impede global money laundering and terrorist financing. It is a policymaking body that monitors implementation of FATF Recommendations and FATF Standards and is not binding as a supervisory authority for financial institutions. Myanmar will remain on the list of countries subject to a call for action until the country has implemented an action plan that: demonstrates an improved understanding of money laundering risks in key areas; demonstrates that onsite and offsite inspections are risk-based, and hundi (a type of informal remittance instrument for transferring money) operators are registered and supervised; demonstrates enhanced use of financial intelligence in law enforcement authorities’ investigations, and increasing operational analysis and dissemination by Myanmar’s Financial Intelligence Unit; ensures that money laundering is investigated and prosecuted in line with risks; demonstrates investigation of transnational money laundering cases with international cooperation; demonstrates an increase in the freezing, seizure, and confiscation of criminal proceeds, instrumentalities, and property of equivalent value; manages seized assets to preserve the value of seized goods until confiscation; and demonstrates implementation of targeted financial sanctions related to proliferation financing. Enhanced Customer Due Diligence Unlike other blacklisted countries, Myanmar is not applicable to countermeasures. Instead, the financial institutions of members and nonmember states of the FATF are urged to conduct “enhanced customer due diligence (CDD) measures” to mitigate the risk of money laundering, terrorist financing, and proliferation financing from Myanmar. Examples of these enhanced CDD measures to be applied to certain higher-risk activities include: Obtaining additional identifying information about the customer (available through public databases or internet sources) and regularly updating the identifying

The Bank of Thailand (BOT) and the Fiscal Policy Office have drafted a royal decree that will regulate the hire purchase and leasing of cars and motorcycles under the Financial Institution Business Act B.E. 2551 (2008). This draft royal decree, which comes at a time when the level of household debt is surging in Thailand, aims to address the rise in outstanding debts related to hire purchase and leasing of cars and motorcycles. In recent years, there has been growing concern about such financing for cars and motorcycles, as these arrangements conducted by non-banks are currently unregulated and have sparked many public complaints relating to fees and practices. Scope of Regulated Businesses By virtue of the draft royal decree, businesses carrying out hire purchase and leasing of cars and motorcycles will become regulated businesses under the Financial Institution Business Act B.E. 2551 (2008). The draft royal decree defines “hire purchase” and “leasing” as follows: “Hire purchase” refers to hire purchase of cars and motorcycles according to the Civil and Commercial Code—that is, a contract whereby an owner of a car or motorcycle hires out the vehicle to a customer, and either promises to sell it to the customer or promises that it will become the property of the customer, on the condition that the customer makes a certain number of payments. “Leasing” refers to renting of a car or motorcycle under a financial lease contract in which the lessor procures a car or motorcycle according to the lessee’s request from a manufacturer, distributor, or other party, or a car or motorcycle repossessed from another lessee, in order to allow the lessee to utilize the vehicle. The lessee is obligated to maintain and repair the leased car or motorcycle during the leasing term. However, the lessee cannot terminate the contract unilaterally before maturity. Upon

Throughout 2022, the Central Bank of Myanmar (CBM) has implemented a series of rules surrounding the compulsory conversion of foreign currency balances in the country. This began on April 3, when the CBM issued a notification directing foreign currency holders in Myanmar to convert their foreign earnings into Myanmar kyat (MMK), within one day, at the official exchange rate. Since then, the CBM has issued further clarifications and instructions for banks authorized to handle foreign currency, responded to some concerns from foreign investors by exempting certain foreign investment projects from the conversion requirement, and relaxed the currency conversion requirements for trade at the Chinese and Thai borders. The process has not been without some trial-and-error as well, with the CBM walking back some exemptions after they were enacted. Foreign investors and business owners, both in the country and abroad, have raised concerns about this centralized control of foreign currency flow and the depletion of foreign currency in Myanmar’s business community. To help readers understand the sometimes-surprising moves by the CBM over the past months, this article will summarize the key developments in the CBM’s efforts relating to foreign currency conversion. Establishment of Compulsory Exchange Requirement On April 3, 2022, the CBM issued Notification No. 12/2022 and Directive No. 4/2022 requiring nearly all individuals, companies, and other organizations in Myanmar to convert foreign-currency income received from abroad to MMK within one working day of receipt. These requirements took immediate effect for all transfers and applied retroactively to foreign currency balances already in the country. All authorized dealer (AD) banks (i.e., those licensed to exchange foreign currency) were instructed to convert foreign currency held in the foreign currency accounts of “internal residents”—which included locally registered companies, organizations, and offices; Myanmar branches of foreign companies; and individuals residing or established in Myanmar

On August 5, 2022, the Central Bank of Myanmar (CBM) adjusted the country’s official reference exchange rates. The new rate for US dollars is USD 1 to MMK 2,100—up from the previous rate of USD 1 to MMK 1,850. Authorized dealer (AD) banks (i.e., those licensed to exchange foreign currency) were to begin using the updated rates that same day, in accordance with Myanmar’s requirement to convert foreign currency transfers and balances to local currency using the official CBM rates. In addition, the CBM issued Notification No. 36/2022 to clarify its foreign currency conversion requirement for exporters. The notification specifies that only 65 percent of income received from exportation needs to be converted into MMK within one day. An analysis of the regulations laying out the currency conversion requirements mentioned above suggests that the remaining 35 percent of export earnings balance will be converted into MMK if exporters do not use it within 30 days. Noncompliance with the requirements of Notification No. 36/2022 is punishable under the Foreign Exchange Management Law with imprisonment for up to one year, a fine, or both. For more details on these foreign exchange developments, or on any aspect of financial regulations in Myanmar, please contact Tilleke & Gibbins at [email protected].