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The Financial Express

Canadian ban and Bangladeshi money launderers


File photo used for representational purpose. (Collected) File photo used for representational purpose. (Collected)

Recently, a report that Canada has slapped a ban on the purchase of residential properties in that country by foreigners has drawn much media attention. And the reason for such attention is obvious. But how far that ban is going to discourage the Illicit Financial Flow (IFF) from Bangladesh to be invested in the real estate sector in Canada is the question. As reported, the ban came against the backdrop of soaring home prices in Canada since the pandemic struck. And some politicians believe that foreigners were buying houses in Canada not for the purpose of residing there, but as an investment. Since it is pushing home prices up, the prospective local buyers are losing out to their foreign competitors. So, to keep the housing sector affordable, especially to the general Canadian buyers, the ban was necessary-- so goes the argument. But the pandemic-time situation is no more in existence in Canada. Though the house prices witnessed a steep rise in 2020-2021, in 2022 the situation has actually reversed. Then why is this ban on non-Canadians' buying house in Canada? Moreover, the prohibition that came into effect on January 1, 2023, will last only for two years. To all appearances, the law has a populist bias and, many believe, is meant to impress young voters.

Evidently, the ban has nothing to do with stopping illicit outflow of funds to overseas destinations such as Canada for buying assets there. So, the owners of unearned money in Bangladesh who earlier thought they would buy assets in Canada will now look for other potential safe havens to transfer their money to. And who does not know that these safe havens include Dubai,

USA, UK, Australia, Singapore, Hong Kong, Malaysia, Cayman Island and British Virgin Islands. For these countries including Canada, according to a government report, are the safe havens where illegal money from Bangladesh goes. The report titled, 'National Strategy for Prevention of Money Laundering and Prevention and Combating Financing of Terrorism 2019-2021', published in November, 2019 further stated that such illegal transfer of money was equivalent to 17.5 per cent of the total value of trade transacted over the decade between 2006 and 2015. And the channels through which the country's capital flight occurred included investment visa, permanent residency, long-term residency, second home project and, the then-prevailing comfortable foreign exchange control regime. Understandably, unlike now, foreign exchange regime was more relaxed then, thanks to the strong foreign exchange reserve position of that time.  And the sources of that illegal money, as expected, were tax evasion, mis-invoicing in external trade (export and import), loan scams and underworld activities including smuggling, drugs and human trafficking. Also included among these sources were illegal outward remittance by expatriate workers employed in Bangladesh and inward remittance by Bangladeshi expatriates overseas through illegal means, for example, hundi.

Mention may also be made here of the Global Financial Integrity (GFI)'s report released in mid-December of 2021. According to that report, between 2009 and 2018, Bangladesh on an average lost to the tune of USD8.27 billion annually only due to mis-invoicing. And this time again, the average loss of customs and taxes during that decade between 2009 and 2018 was 17.3 per cent of value of business tractions through trade done during that period.  The report further said that among the South Asian countries, Bangladesh was third highest in its losses through trade related mis-invoicing.  But one wonders if illegal transfer money abroad through mis-invoicing has shown any sign of abating in the meanwhile despite the existence of the prevention strategy.

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