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Money laundering results in flight of funds from Bangladesh which could otherwise be part of the much-needed capital driving the country's economy. It is rampant here as revealed by leaked financial documents like the Panama Papers.
For a progressive economy like Bangladesh, it is really a perplexing issue that billions of currencies are being driven out of the country due to money laundering. Since socio-political stability persists in the country, why they should be encouraged to send money abroad!
A report prepared by the Global Financial Integrity (GFI) says a staggering amount of $5.9 billion was siphoned out of Bangladesh in a year through trade mis-invoicing. The findings of the Washington-based research and advisory organisation were based on International Monetary Fund (IMF) trade analysis data in goods of 148 developing countries with advanced economies.
The GFI defines illicit financial flows (IFFs) as money that is illegally earned, used or moved and which crosses an international border. Trade mis-invoicing is a method of moving IFFs, and includes the deliberate misrepresentation of the value of imports or exports in order to evade customs duties and VAT, launder the proceeds of criminal activity or to hide offshore the proceeds of legitimate trade transactions.
High levels of mis-invoicing, as a percentage of total trade, indicate that most governments in the developing countries do not benefit from a significant portion of their international trade transactions with advanced economies. Bangladesh tops the list of lesser developed countries for illicit financial outflow.
Capital flight is a global problem but the situation in Bangladesh is something alarming. It has been observed that lack of an investment environment promotes the illegal outflow of finance.
Analysts say say relevant institutions should be strengthened against capital flight and a taskforce may be formed to ensure proper coordination. The deposits of Bangladeshis in various Swiss banks dropped recently as the central bank is reportedly keeping a close watch on money laundering.
Bangladesh Bank claimed that it has micro-level regulations to monitor whether money is being laundered out of the country through fake imports or not. In recent times, it has found some gross violations in foreign exchange transactions that have raised concern about money laundering.
Bangladesh's per capita debt is $378 and the debt burden will be low if it could curb illegal capital flight. Many Bangladeshis have accounts in Swiss banks, while names of some Bangladeshis came in the recently leaked Panama papers. It will be highly unfair if the country is unable to prevent illicit capital flow out of the country.
Cooperation with the relevant countries must also be stepped up to prevent this transfer of money. According to GFI, 85 of 90 per cent of this illegal wealth transfer are done in the guise of international trade. This sector needs to be closely monitored. However, political will appears to be the most important tool to prevent such illegal capital flight.
It is shocking that such a huge illegal outflow of capital is happening at a time when the country is suffering from a sheer lack of investment. It also shows the businesses' lack of confidence in investing in the country. This has to be reversed at any cost,.
Although the government must keep vigilance to prevent money laundering and tax evasion, but it should also work for a stable economy and sustainable development for long-term results in preventing such unethical practices.
A healthy business environment can attract more foreign direct investment, encourage more entrepreneurs to invest in the country, decrease flight of capital by local and multinational enterprises and generally sustain a healthy economic environment in the country.