The Central Bank of Bangladesh (CBB) was formed in December 1971, following the country’s independence, by taking over the Dhaka branch of the State Bank of Pakistan.  As a sole issuer of the Bangladeshi Taka (BDT) and the country’s highest financial regulator, the bank has been tasked with promoting monetary stability.

Bangladesh Bank oversees the finance sector and facilitates the country’s economic development. Since then, the bank has evolved as a full regulator of the scheduled banks, non-banking financial institutions, and payment system operators under Bangladesh Bank regulations.

What are the functions of the Central Bank of Bangladesh?

The Central Bank of Bangladesh is the central monetary authority of the country. Its roles are diverse, including monetary policy, financial stability, regulation, and supervision. The following are the functions:

• Develops and operates monetary policy to manage inflation, stabilize prices, and promote economic growth.
• Issues the national currency (Bangladeshi Taka) and maintains its stability.
• Manages the foreign exchange reserves and controls the exchange rate in order to achieve external stability.
• Regulates and supervises banks and financial institutions under the Bank Company Act and other laws.
• Implements AML/CFT controls by the Money Laundering Prevention Act 2012 and the Anti-Terrorism Act 2009.
• Serves as the banker to the government, conducts treasury operations, manages public debt, and operates monetary policy tools such as CRR and SLR.
• Extends lender-of-last-resort support to financial institutions and banks during times of crisis.
• Fosters financial innovation and inclusion through mobile banking, digital finance, green banking, and SME financing.
• Protects depositors’ interests by enforcing sound banking and consumer protection.
• Facilitates economic growth through credit direction to priority sectors as well as promotion of sustainable lending.

As a whole, these activities provide a strong monetary system that supports banking stability and promotes overall economic development in Bangladesh.

How does the CBB regulate Anti-Money Laundering and Counter Terrorist Financing (AML/CFT)?

The bank regulates Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) by implementing the Money Laundering Prevention Act 2012 and Anti-Terrorism Act 2009. It issues comprehensive regulations mandating banks and financial institutions to conduct customer due diligence, know your customer verification, record keeping, and report suspicious transactions in a timely manner. Politically exposed persons, cross-border transactions, and non-resident accounts require enhanced scrutiny under CBB anti-money laundering rules.

The central bank also requires financial institutions to appoint compliance officers, implement internal AML/CFT procedures, and provide staff training. It gathers and processes suspicious reports through the Bangladesh Financial Intelligence Unit (BFIU) and cooperates with local and foreign agencies. By aligning its regulations with international standards set by the FATF, the CBB in AML ensures the financial system of the country is protected against threats posed by money laundering and terrorism financing.

How does the Central Bank of Bangladesh supervise banks and financial institutions?

Bangladesh Bank oversees banks and financial institutions through licensing, regulation, monitoring, and enforcement. Institutions are required to meet set requirements in terms of governance, capital, and risk prior to being issued an operating license.

The bank conducts on-site and off-site inspections. On-site examination tests aspects such as loan quality, governance, and compliance practices. Off-site monitoring is founded on regular reports of liquidity, capital, and suspicious transactions. A risk-based approach is utilized, with more priority given to institutions or activities that are regarded as high-risk.

If irregularities are detected, the bank may impose sanctions, order corrective measures, or, in extreme cases, restrict operations. It also regulates foreign exchange business and ensures adherence to monetary policy rules like reserve requirements. Increasingly, real-time surveillance is being carried out through technological instruments. This system protects depositors, promotes financial discipline, and maintains the financial system of Bangladesh at par with international standards.

What Are Bangladesh Bank’s KYC and CDD Requirements?

Bangladesh Bank has also issued detailed KYC and CDD guidelines in order to promote transparency. The guidelines mandate the institutions to establish the identity of customers, identify the nature of their business, and conduct related risk analysis. High-risk categories are subjected to more enhanced due diligence, which involves stricter PEP screening, non-resident accounts, and cross-border transactions.

Aside from the onboarding requirements, the Money Laundering Prevention Act (MLPA) 2012 and the AML/CFT Guidelines issued by BFIU strongly emphasize continuous monitoring. Banks must monitor customer behavior continuously in order to detect unusual patterns and report suspicious transactions where required. By integrating KYC and CDD as part of routine operations, the CBB compliance framework acts as a frontline defense against financial crime.

How does the Central Bank of Bangladesh enforce sanctions and compliance obligations?

The Financial Intelligence Unit of the Central Bank of Bangladesh (BFIU) updates and maintains the sanctions list of Bangladesh, also referred to as the Domestic Sanctions List (DSL). It is the official reference for all banks, payment institutions, and non-banking financial institutions. These institutions have to screen all customers, cross-border payments, and transactions against this list. When a match is identified, the individual or entity in question must have their accounts frozen immediately, and the transaction must be reported to the regulator for investigation.

Enforcement is not restricted to standard checks. Circulars and CBB compliance guidelines are issued by the BFIU to enable the use of standard procedures by financial institutions in executing Bangladesh’s sanctions list. Failure to comply may result in penalties, operational restrictions, or reputational damage.

Alongside, Bangladesh has strengthened its AML/CFT system to comply with FATF and UN guidelines. In 2014, the FATF plenary removed Bangladesh from the “grey list” after recognizing significant progress in addressing strategic deficiencies. These efforts have enhanced investor confidence, though some vulnerabilities persist. Overall, Bangladesh is becoming more viewed as a lower-risk jurisdiction for combating illicit finance.

How does the Central Bank of Bangladesh coordinate with FATF and other global AML bodies?

Bangladesh is also a member of the Asia/Pacific Group on Money Laundering (APG), which operates under supervisory oversight of the Financial Action Task Force (FATF). Membership in this group places Bangladesh’s Central Bank in a position to ensure that its AML/CFT standards are aligned with global expectations.

This global coordination ensures that CBB in AML/CFT policies remains consistent with international standards. For instance, compliance with FATF recommendations helps avoid the risk of being listed on monitoring lists, which otherwise can restrict international trade and financial transactions. Through partnerships with international AML agencies, CBB complements its national framework while promoting the country’s international economic goals.