Checking money laundering

Money laundering is having a negative impact on the economy of Bangladesh. Top economists of the country are of the view that urgent steps are needed for preventing illegal money transfer to foreign countries. Money is transferred in many ways. Local investment will suffer due to illegal money transfer. Employment generation will not take place if there is heavy money transfer. Hence, steps are needed to stop money laundering. If people involved in money laundering are caught, they must be given adequate punishment. There are many legal provisions for stopping money transfer, but these are not applied properly.

Normally, black money is transferred or laundered. Such money is generated through corruption that has to be stopped. Intention of the incumbent government is extremely important in controlling money laundering. Government may take initiative to bring back laundered money and the money launderers in such cases should face legal action. This will help reduce money laundering. Politically influential people and owners of black money transfer the same to other countries in a bid to save their wealth. Although no information is available about money laundering from local institutions, some foreign agencies provide such information.

Most of the money transfers take place through import and export. This is done through banks. At the time of import, money is transferred by overvaluing imports. Excess money is  kept outside the country. Exports are undervalued for keeping the excess money outside the country. Hundi operators keep remittance in foreign countries and send taka to the relatives of residents in foreign countries. Money is transferred if there is no confidence in politics and the economy. During the last fiscal year, letter of credit (L/C) opening increased by 44 per cent. There is chance for it to increase further by the time of election. There is a chance of money transfer in the high volume of imports. There may be a debate about the amount of money transfer, but money laundering is taking place.

The FBCCI (Federation of Bangladesh Chambers of Commerce & Industries) President is of the view that opportunities may be created for investment in local business/industries and foreign countries. If there is no investment, money becomes idle and the idle money is transferred to other countries. Money will flow where profit is the highest. Black money is made through corruption. If corruption can be stopped, flow of black money will be reduced. Scope for money transfer will also be reduced.

Banks are most reliable and dependable media for transfer of money. According to the US-based research institute Global Financial Integrity (GFI), $75.85 billion was transferred from Bangladesh in ten years (2005 to2014). In local currency, it is 6,068 billion. During this period, import export business stood at $446.15 billion. Of the total, about 7.0 to 12 per cent has been reportedly laundered. About 4.0 to 12 per cent of this amount has come to Bangladesh in the same manner. Analysts believe that about 7.0 to 11 per cent of import export trade value has been transferred illegally.

Import of capital goods has not resulted in proportionate industrialisation in Bangladesh. Therefore, researchers believe that money has been transferred to other countries. If information on import of capital goods is made available to the banks, money transfer in the guise of imports will come down. Beneficiaries of money laundering get money through illegal means called hundies. Dubai of UAE, Malaysia and Hong Kong are the safe places for hundi operations. Money is sent out without bringing goods. On the other hand, money is not brought into the country against exports. We can recall that import of empty containers have been detected in Chittagong and Mongla ports in recent times.

The government has set up Central Coordination Taskforce to stop money laundering, prevent financing of terrorist activities and bring back the money already transferred outside the country. There is no coordination among the agencies responsible for bringing back money from outside the country. Agencies are working independently. And as such, no strong action can be taken. Office of the Attorney General, Bangladesh Bank (BB), Anti-Corruption Commission, National Board of Revenue, CID and RAB are working on money laundering. There is also a Central Coordination Taskforce under the leadership of the Finance Minister. The National Coordination Committee has already approved a strategy for 17 ministries and agencies.

In the strategy paper, 138 steps have been identified. Latest position shows that 71 steps have been implemented, 36 steps have been partially implemented and 31 more are yet to be implemented. Bringing back laundered money is a complicated process. Bangladesh has not been able to show much progress in this regard. No action has been taken against those responsible for money laundering. Continued follow up is needed to make progress in bringing back laundered money. There has to be regular follow up which is wanting. BB, NBR and ACC have to take initiative.

BB has informed that it has probed the persons mentioned in Panama Papers and Paradise Papers. Information has been passed on to the relevant agencies. BB Deputy Governor Razee Hasan has said that report has been received about the laundering of Tk 40 billion through banking channel. A group of businesses is reported to have been involved in the capital flight amounting to Tk 40 billion in disguise of imports and exports. After investigation, information has been passed on to the law enforcing agencies for necessary action.

In fact, corruption is the main reason behind money laundering. People do not want to keep the money earned through corruption in the country. Because, they think that it may give rise to many problems. Therefore, they transfer money outside the country for safe keeping. Moreover, if there is no investment in the country due to political instability, money is transferred to safe zones. If money laundering is to be stopped, environment has to be created for encouraging investment locally. Investors must have full security. In the election year, there is possibility of money transfer. Measures have to be taken well in time to stop money laundering.

Syed Jamaluddin is an economist and columnist.

 [email protected]