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Reining in trade-based money laundering  

Published: August 15, 2019 22:08:15 | Updated: August 17, 2019 22:04:18


The governments in developing countries like Bangladesh do toil hard to bring in foreign aid and investments. Thus, lots of handshakes and ribbon-cutting ceremonies do usually mark the signing of deals on their inflows. But, in a contrasting development, private money, sometimes, is smuggled across borders or stashed in offshore bank accounts, much to the disappointment of policymakers of those countries. What, however, turns out to be more worrying is that both inflow and outflow of illicit funds have recorded substantial rise in recent times. An international campaign group estimates that illicit flow of funds to and from developing countries is around one-fifth of their trade with the developed world. And trade itself is being used as a major vehicle for laundering money. Funds earned, legally or otherwise, are siphoned off through mis-declaration in trade transactions. About 80 per cent of money, according to a number of studies, is being laundered through foreign trade.

As part of global efforts to stop the trade-based money laundering, Bangladesh has put in place a number of measures. The Bangladesh Financial Intelligence Unit (BFIU) at the country's central bank remains at the forefront of the fight against the scourge of money laundering. The Unit, according to a report published in the FE early this week, has finalised a guideline for the prevention of trade-based money laundering. The guideline, it is hoped, would facilitate the banks to detect any attempt to transfer funds illegally using trade transaction routes.

But the truth is that the central bank is taking too long a time to devise appropriate measures and employ those effectively to stop the illegal transfer of funds abroad through trade transactions. Illegal transferors of funds do usually take recourse to misrepresentation of price, quality and quantity of goods and services. In many cases, buyers and sellers join their hands in getting funds illegally transferred. However, due alertness on the part of one key player in foreign trade - bank - can largely foil the money laundering move. Mispricing remains one of the major ways of siphoning off funds through trade. In this age of information technology, knowing prices of commodities is too simple an act for bankers. What is needed is real intention on their part to stop the rot.

A country like Bangladesh can ill afford the flight of capital, varying from $6.0 billion to $9.0 billion a year. The estimate made available by the Global Financial Integrity (GIF) might appear big, but there is no way of contesting it for non-availability of credible data. Most part of the funds siphoned off abroad are ill-gotten. The high incidence of corruption makes such transfer too obvious. So, accumulation of transferable tainted funds needs to be stopped in the first place through effective anti-graft measures.

The anti-graft measures should be appropriately followed up by relevant other agencies, including the Bangladesh Bank, bank branches handling foreign trade and customs. Honestly speaking, these days, it remains too easy a task for the hundi operators to transfer funds from one country to another. Yet, a big chunk of money is transferred through trade transactions. A coordinated and honest effort by agencies handling foreign trade can stop such transfers, to a significant extent. The BFIU guideline, hopefully, would help achieve that objective.

 

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