Bangladesh -- Sanctions Compliance Regulatory Overview

Bangladesh has a highly restrictive stance on cryptocurrencies, with the Bangladesh Bank (the central bank) having issued circulars explicitly stating that buying, selling, and holding virtual currencies like Bitcoin are illegal. This domestic prohibition forms the primary layer of "restriction" on crypto in Bangladesh, making the concept of local "VASP compliance" in the traditional sense largely moot for domestic entities, as VASPs are not permitted to operate.

However, international sanctions and anti-money laundering (AML) / combating the financing of terrorism (CFT) obligations still apply to any individual, entity, or international Virtual Asset Service Provider (VASP) that might engage with Bangladeshi individuals or entities in crypto transactions, regardless of Bangladesh's domestic ban.

Here's a breakdown:

Bangladesh's Domestic Stance on Cryptocurrency

1. Outright Ban and Illegality:

   • The Bangladesh Bank has repeatedly warned against virtual currencies, stating that they are not legal tender and are not authorized by the central bank.

   • The primary legal basis for this prohibition stems from:

     • Foreign Exchange Regulation Act, 1947 (FERA): Cryptocurrency transactions are seen as unauthorized foreign exchange transactions, which are strictly regulated by the central bank. Section 5 of FERA generally prohibits foreign exchange transactions without the Bangladesh Bank's general or specific permission.
     • Anti-Money Laundering Act, 2012: Any unauthorized financial activity, including crypto transactions, could fall under the purview of money laundering if it involves proceeds of crime.
     • Anti-Terrorism Act, 2012: Similar to AML, unauthorized financial flows using crypto could be construed as financing terrorism.

   • Legal Reference:

     • Bangladesh Bank Circulars: While specific circular numbers can vary and direct links are sometimes transient, the Bangladesh Bank has consistently maintained this stance. For example, a January 2018 circular (DBD Circular No. 2, "Public Warning on Virtual Currencies") explicitly warned against the use of virtual currencies.
       • General Reference to Bangladesh Bank's Stance: You can refer to the Bangladesh Bank's official website for current policies and regulations, which implicitly and explicitly prohibit crypto: Bangladesh Bank Official Website

OFAC/EU/UN Sanctions Compliance Requirements for VASPs

Despite Bangladesh's domestic ban, international VASPs, financial institutions, and individuals (including Bangladeshi nationals residing abroad) must comply with international sanctions regimes when dealing with virtual assets, especially if there's any nexus to the U.S. or EU financial systems, or to UN-designated individuals/entities.

1. OFAC (Office of Foreign Assets Control - U.S. Department of the Treasury):

   • Scope: OFAC sanctions are extraterritorial in nature, meaning they can apply to non-U.S. persons and entities involved in transactions that touch the U.S. financial system, involve U.S. persons, or relate to U.S.-origin goods or technology. Given the global nature of many cryptocurrencies and stablecoins (often USD-pegged), most significant crypto transactions have some nexus to the U.S. financial system.
   • Requirements for VASPs: VASPs must implement robust AML/CFT and sanctions compliance programs to prevent prohibited transactions. This includes:
     • Sanctioned Entity Screening: Screening all users (Know Your Customer/KYC), their counterparties, and transactions against OFAC's Specially Designated Nationals (SDN) and Blocked Persons List, as well as other sanctions lists (e.g., those related to specific countries or programs).
     • Geographic Restrictions: Prohibiting transactions with individuals or entities in comprehensively sanctioned jurisdictions (e.g., Cuba, Iran, North Korea, Syria, certain regions of Ukraine/Russia) or those subject to targeted sanctions.
     • Transaction Monitoring: Detecting patterns indicative of sanctions evasion.
     • Reporting: Reporting blocked property and rejected transactions.
   • Legal Reference:
     • OFAC Compliance: OFAC Sanctions Programs and Country Information
     • OFAC Guidance for the Virtual Currency Industry: OFAC's A Framework for OFAC Compliance Commitments (See also guidance specific to virtual currency industry from 2019/2020)

2. EU Sanctions:

   • Scope: EU sanctions are binding on all persons and entities under EU jurisdiction (EU citizens, companies registered in an EU member state, activities on EU territory, and in some cases, certain activities outside the EU by EU nationals or entities).
   • Requirements for VASPs: Similar to OFAC, EU-based VASPs (or those interacting with EU financial systems) must:
     • Sanctioned Entity Screening: Screen against the EU Consolidated List of persons, groups, and entities subject to EU financial sanctions.
     • Geographic Restrictions: Prohibit transactions involving individuals or entities in sanctioned countries or territories, or those subject to asset freezes.
     • Transaction Monitoring and Reporting: Comply with AMLD5/AMLD6 (Anti-Money Laundering Directives) which explicitly cover virtual assets and VASPs.
   • Legal Reference:
     • EU Financial Sanctions: EU Sanctions Map (Consolidated List)
     • Fifth and Sixth Anti-Money Laundering Directives (AMLD5 & AMLD6):
       • AMLD5: Directive (EU) 2018/843

3. UN Sanctions:

   • Scope: UN Security Council Resolutions imposing sanctions are binding on all UN Member States, including Bangladesh. While Bangladesh domestically bans crypto, its government is obligated to ensure its citizens and entities comply with UN sanctions.
   • Requirements for VASPs: International VASPs and national authorities are expected to screen against the UN Security Council Consolidated List to identify individuals and entities subject to asset freezes and other restrictions.
   • Legal Reference:
     • UN Security Council Consolidated List: UN Security Council Sanctions Committees

Sanctioned Entity Screening Obligations for VASPs

For any VASP operating globally and potentially interacting with individuals or entities in Bangladesh (or any other jurisdiction), the obligation to screen for sanctioned entities is paramount.

• Who Must Screen: All VASPs (as defined by FATF), traditional financial institutions, and other obliged entities must screen their customers, beneficial owners, and transactions against relevant international sanctions lists (OFAC SDN, EU Consolidated List, UN Consolidated List).
• Why: To prevent funds and virtual assets from reaching sanctioned individuals, entities, or jurisdictions, and to combat money laundering and terrorist financing.
• FATF Recommendations: The Financial Action Task Force (FATF) sets international standards for AML/CFT. Recommendations 15 and 16 specifically address virtual assets and VASPs, requiring them to implement robust KYC/AML procedures, which implicitly include sanctions screening. Bangladesh is a member of the Asia/Pacific Group on Money Laundering (APG), a FATF-style regional body, and is therefore subject to FATF standards.
  • Legal Reference:
    • FATF Recommendations (especially R.15 & R.16): FATF Recommendations

Geographic Restrictions

• Sanctioned Jurisdictions: International VASPs generally restrict or prohibit services to residents or entities located in comprehensively sanctioned jurisdictions, such as:
  • Iran
  • North Korea
  • Cuba
  • Syria
  • Crimea, Donetsk, and Luhansk regions (and potentially other occupied territories) of Ukraine, and certain individuals/entities in Russia.
• Bangladesh-Specific: While Bangladesh itself is not under comprehensive international sanctions, the domestic ban on crypto means that engaging in crypto activities within Bangladesh is already illegal under Bangladeshi law. For international VASPs, this means exercising extreme caution when dealing with Bangladeshi IP addresses, phone numbers, or declared residences for crypto services.

Penalties for Violations

1. Under Bangladeshi Law (for domestic crypto activity):

   • Foreign Exchange Regulation Act, 1947: Violations can result in imprisonment, significant fines, and confiscation of assets.
   • Anti-Money Laundering Act, 2012: Penalties range from substantial fines (e.g., BDT 500,000 to BDT 10 million or more) to imprisonment for several years, along with forfeiture of assets.
   • Anti-Terrorism Act, 2012: The most severe penalties, including lengthy imprisonment and heavy fines, for financing terrorism.
   • Note: As crypto is illegal, engaging in it itself can be a predicate offense for AML/CFT charges.

2. Under International Sanctions Regimes (for individuals/entities violating OFAC/EU/UN sanctions):

   • OFAC:
     • Civil Penalties: Can reach hundreds of thousands or even millions of U.S. dollars per violation, depending on the program and severity.
     • Criminal Penalties: For willful violations, individuals can face lengthy prison sentences (e.g., up to 20 years) and multi-million dollar fines. Corporations can face even larger fines.
   • EU Sanctions: Penalties vary by Member State but can include significant fines and imprisonment.
   • UN Sanctions: While the UN itself doesn't impose penalties directly on individuals, Member States are obligated to enforce UN sanctions through their domestic laws, leading to penalties similar to those for OFAC or EU violations.
   • Reputational Damage: Significant negative publicity, loss of business, and exclusion from the financial system.

Country-Specific Sanctions Lists for Crypto

Bangladesh does not maintain a specific "crypto sanctions list."

• Given its outright prohibition on cryptocurrencies, Bangladesh's focus is on preventing any crypto activity rather than sanctioning specific individuals or entities within the crypto space.
• The Bangladeshi government's "sanctions" efforts would align with UN Security Council resolutions and focus on general financial sanctions, applying to all forms of financial transactions, which would include crypto if it were legally permitted. Since it's not, the overarching ban serves as the primary "restriction."

Summary for Bangladesh:

For anyone operating within Bangladesh, the primary restriction is the outright illegality of cryptocurrencies, carrying significant domestic legal penalties. For international VASPs or individuals engaging in crypto transactions with a nexus to Bangladesh, the overarching international sanctions regimes (OFAC, EU, UN) remain critically important. While Bangladesh lacks a crypto-specific sanctions list, international compliance dictates that robust screening and transaction monitoring protocols must be in place to avoid facilitating transactions involving sanctioned parties, regardless of the legality of crypto in the user's home country.