Trade-based money laundering

Banks for independent source to verify foreign trade price

Ismail Hossain | Published: May 25, 2019 09:52:33 | Updated: May 26, 2019 10:28:48

Picture used for illustrative purpose

Banks want an independent source for price verification of imported and exported goods and services so that they can check mis-invoicing to prevent trade-based money laundering, a survey has found.

According to the survey, 50 per cent banks want an independent source for price verification and some 60 per cent wants to establish a central price database to do so.

The survey was conducted recently by the Bangladesh Institute of Bank Management (BIBM) titled "Addressing Trade Based Money Laundering in Bangladesh: An Assessment."

A team of bankers, academics and the National Board of Revenue officials conducted the survey led by BIBM director (Training) Dr Shah Md Ahsan Habib.

The bankers gave their opinions on a range of issues in the survey related to trade-based money laundering, its risks and the way forward.

They said the formulation of price range as per HS code might be a supportive measure for ensuring price competitiveness.

Some 40 per cent banks think expensive procurement of the infrastructure to prevent trade-based money laundering is a challenge for smaller banks.

The other challenges identified by banks are: the absence of comprehensive guidelines (10 per cent) on trade-based money laundering, insufficient skilled resources (26 per cent) and inadequate support from board/senior management (15 per cent).

Some 45 per cent banks think the absence of customers' updated database is the key concern for ensuring the customer-level risk assessment.

The other challenges are the lack of cooperation from customers (20 per cent), unhealthy competition in banks (10 per cent), the lack of cooperation in relevant departments (5 per cent), etc.

Hundred per cent banks claimed they are well-equipped with three-level transaction processing and approval system in combating this type of money laundering.

However, the study paper commented that practically most of the banks, except for a few foreign commercial banks, do not have such system in place.

It identified the lack of awareness among bankers and clients as one of main reasons for the rise such money laundering.

However, greater coordination of customs and central bank through online arrangement has brought positive changes in reporting suspicious transaction reporting.

In fiscal year 2017-18, the Bangladesh Financial Intelligence Unit (BFIU) received a total of 3,878 suspicious transaction reports (STR) and suspicious activity reports (SAR) from reporting agencies, up 64.50 per cent year-on-year, according to the BFIU's annual report. This was the highest ever receipt of such reports.

The reporting agencies-banks, non-bank financial institutions, money changers and capital market intermediaries-reported 5,422 suspicious transactions valued at Tk 9.21 billion last year.

The paper made a set of recommendations, including the enactment of separate LC law like USA, China and Vietnam's.

Time has come now to formulate a set of guidelines or rules and adopt international rules associated with international bank guarantees to identify true exposure of banks and international bank guarantee, the paper recommended.

A guideline paper could be formulated on price competitiveness from the regulatory authority for all banks so that all lenders can comply with a unified approach, the study paper said.

All banks could form a committee comprising board and senior management to discuss the periodic review on the enterprise-level risk management, according to the paper.


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