Move to thwart money laundering thru cross-border transactions

Bangladesh's securities regulator moves to join a global drive to prevent alleged money laundering through cross-border transactions involving securities, derivatives and other financial instruments, amid heightened incidence of fund flows.

Under a global compact, the offensive will be conducted through sharing requisite information about such illicit acts, officials have said about the move that incidentally comes in the wake fund flight beyond frontiers on the back of globalisation.

To this effect, Bangladesh Securities and Exchange Commission (BSEC) has to sign Enhanced Multilateral Memorandum of Understanding (EMMoU), an extended version of a previously signed MMoU, with the International Organisation of Securities Commissions (IOSCO).

A recent meeting held at the Financial Institutions Division reviewed the EMMoU and decided that the BSEC could enter into the memo after carrying out necessary corrections in line with the opinions from the ministries of Foreign, Commerce, and Post and Telecommunications, Bangladesh Bank and Bangladesh Financial Intelligence Unit.

The revised memo has to be vetted from the Legislative and Parliamentary Affairs Division before signing, according to officials who attended the meeting.

The meeting minutes, seen by The Financial Express writer, mention that the BSEC had signed MMoU with the IOSCO back in 2013 to provide and obtain securities-related cooperation to and from its member-bodies.

At the meeting, Kawsar Ali, an additional director of the BSEC, said the IOSCO now has offered the BSEC to sign EMMoU for carrying out collaborative activities with the other signatory bodies to lessen challenges and risks in case of cross-border transactions on the securities market.

He said following the signing of the EMMoU the signatories would work jointly to obtain and share audit papers, communications, and other information relating to the audit or review of financial statements.

The crusaders against pecuniary offences can also compel the companies or persons involved in money laundering through cross-border transactions involving securities, derivatives and other financial instruments to appear for providing testimony.

In case of noncompliance by any such company or person about providing testimony, the signatory bodies will have the capacity to mete out punishment to them.

"They can freeze assets, if possible, or if not, advise and provide information on how to freeze assets, at the request of another signatory body," said Mr Ali.

The signatories can obtain and share existing internet service-provider records and existing telephone records (not including the content of communications) including with the assistance of a prosecutor, court or other authority.

A senior FID official told the FE that EMMoU is not legally binding, and after signing it, the BSEC will work with other signatories to prevent money laundering.

He said due to globalisation and technical advances the risks and challenges of unlawful cross-border transactions increased and so the IOSCO proposed that its member bodies further extend cooperation in preventing money laundering.

Contacted Monday, BSEC additional director Kawsar Ali did not want to comment on this as he is not authorised to talk to the media.

However, on Tuesday, referring to his discussion with the BSEC chairman, Mr Ali told the FE that the issue was still at "discussion level" and would inform the media after receiving approval from the government for signing the memo.

According to the EMMoU, which was reviewed at the FID meet, the signatory bodies "will provide each other with the fullest assistance permissible to investigate suspected violations of, ensure compliance with and enforce their respective laws and regulations".

The assistance available under this deal also includes information sufficient to reconstruct all orders (whether or not executed) and transactions involving securities, derivatives and other financial instruments, including records of all funds or assets transferred into and out of bank, brokerage or other financial accounts relating to these transactions.

Also, they will share information that identifies, for each transaction: the beneficial owner and controller, the account holder, the persons conducting the transaction, the amount purchased or sold, the time of the transaction, the price of the transaction, and any persons involved in the transaction.

Furthermore, the signatories will share information that identifies or traces funds, or assets into which those funds are converted, among others.

Faruk Ahmed Siddique, a former chairman of the Bangladesh Securities and Exchange Commission, told the FE Tuesday foreign investment in Bangladesh's securities market is very minimal and remained almost stuck during the last one year.

Thus, he says, the possibility of money laundering through Bangladesh's capital market is almost nothing.

"Even if any incident of money laundering takes place through capital market that is also very small."

Mr Siddique says money laundering in Bangladesh is mainly trade-based that takes place through under- and over-invoicing in trade.

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