The Financial Express

Illicit trade during Covid-19 & Bangladesh

| Updated: September 26, 2020 21:46:40

Dhaka customs officials in the second week of September seized over 15 kilogrammes of amphetamine powder from a flight of Biman at Hazrat Shahjalal International Airport in Dhaka 	– Collected Photo Dhaka customs officials in the second week of September seized over 15 kilogrammes of amphetamine powder from a flight of Biman at Hazrat Shahjalal International Airport in Dhaka – Collected Photo

An immediate outcome of the Covid-19 is a booming black market of medical equipment. Different global bodies and agencies have already expressed concern on rise of illicit trade in drugs and medical products, writes Mohsena Khanom

As the Coronavirus (COVID?19) pandemic spreads across the globe, nations are struggling to deal with its impact, most notably in health, education and the wider economy. Governments are trying to use various tools to fight against the spread of this deadly virus.  In some cases, they must put restrictions on many things while in other cases they must relax some regulatory requirements. Taking advantage of relaxed regulations, coupled with slack vigilance, illicit trade has embedded itself more firmly in the economy.

A blog of Global Financial Integrity (GFI), a Washington-based forum dedicated to fight against illicit financial flows (IFFs), said: "With the onslaught of the Covid-19 crisis, concerns are growing that the scale and scope of IFFs could be increasing as authorities are distracted and overwhelmed by the unprecedented economic fallout. Such concerns are especially acute in developing countries, many of which are already characterised by poor governance, weak regulatory oversight and corruption."

An immediate outcome of the Covid-19 is a booming black market of medical equipment. Interpol conducted an annual week-long (March 03-10, 2020) operation titled Operation Pangea XIII. It saw authorities from over 90 countries move against the illicit trade of medical equipment and products where counterfeit facemasks, substandard hand sanitizers and unauthorised antiviral medication were seized. Estimate showed that the seizures of unauthorised antiviral medication increased by 18 per cent. Unauthorised chloroquine - the antimalarial drug used to treat Covid-19 in some countries - surged by more than 100 per cent. More than 34,000 counterfeit and substandard masks, as well as fake medicine purported to cure Covid-19, were also seized during the operation.

Different global bodies and agencies have already expressed concern on rise of illicit trade in drugs and medical products. United Nations Office on Drugs and Crime (UNODC), in a report titled COVID-19 and the Drug Supply Chain: from Production and Trafficking to Use, released a few months back, argued that measures implemented to prevent the spread of Covid-19 have a mixed impact on the global drug supply chain. It, however, cautioned that economic difficulties due to Covid-19 may change drug consumption for the worse.

During the Covid-19 pandemic, the bootlegging, counterfeiting and smuggling of fake, tainted or counterfeited alcohol and tobacco products have been big business for criminals, as lockdowns and bans on excisable goods have cost governments hundreds of millions of dollars in lost revenue. For example, a ban on cigarette sales in South Africa fuelled a black market that lost the finance ministry around US$2.2 million per day. Similar losses were seen in Malaysia and the Philippines, which have also had cigarette bans during lockdowns.

World Economic Forum (WEF) noted that transnational organised crime networks are taking advantage of ineffective regulatory frameworks, supply shortages, changing consumer preferences and price gaps to expand their footprint during the pandemic.

The problem is already so large that even before the outbreak of pandemic the WEF estimation showed that over US$2.2 trillion or some 3.0 per cent of global Gross Domestic Product (GDP) may be lost due to illicit trade leakages in 2020. Many of these will double within five years.

As markets reopen and Covid restrictions are gradually lifted, it is imperative that organised criminal groups are not allowed to gain further ground by capitalising on job losses and dwindling buying power. Governments must take immediate action from a policy and enforcement standpoint to safeguard their economies.

BANGLADESH CONTEXT: Being a developing country, Bangladesh has been vulnerable to illicit financial flows and trade-based money laundering. An ongoing  mismatch or value gap in reported bilateral trade between Bangladesh and the rest of the world has indicated that trade mis-invoicing continues to be a problem, according to a report of GFI. The country's average trade value mismatch with all the trading partners (170 countries for the GFI report) stood at around 18.0 per cent of the country's total trade or US$7.53 billion. In other words, this amount of money had annually flown out of Bangladesh on average through trade mis-invoicing and other illegal transfers.

So, it is not surprising that Bangladesh would see the illicit trade of medical equipment during the pandemic.  To ensure smooth supply of Personal Protective Equipment (PPE), the country has already imposed temporary export prohibition on two products- surgical mask and disinfectants (hand sanitisers).  The country usually maintains one of the highest averages MFN (Most Favoured Nation)-applied tariffs on (PPE). While global average import tariff on PPE is 11.50 per cent, the rate in the country is 19.80 per cent, according to the World Trade Organization (WTO). The authorities waived all the customs duties on safety kits and related raw materials at the last week of March, after the outbreak of deadly virus.

As demand increased, local producers came to supply some PPE equipment like  face masks and protective clothing. Within a short time span, different types of face masks became available in the market, although most of those were ineffective due to a lack of quality. Moreover, the country's standard setting and testing body didn't provide any rules or standards for face mask or other PPE equipment which meant product quality and health and safety was compromised. A lack of clear instruction to maintain standards, or an absence of guidelines coupled with limited monitoring allowed criminal gangs to sell sub-standard PPE. This is not directly linked with illicit trade of medical products as the country's total trade in medical items is still small.

Elsewhere, money launderers are trying to tap every opportunity to expand their illicit trade activities.  Customs authorities in the first week of September seized 15kg 65gm of amphetamine at Hazrat Shahjalal International Airport in Dhaka. The drug was sized from a cargo flight of Biman Bangladesh Airlines which was destined for Australia via Hong Kong. This may be a tip of the iceberg as several such incidents were detected earlier. For instance, in November last, Chittagong Customs House seized contraband drugs imported with a declaration of cosmetics items from China.

Bangladesh has ramped up efforts to combat illicit trade and money laundering. Last year, the Ministry of Finance (MoF) has issued the long-awaited rules of the Money Laundering Prevention Act 2012 by defining working areas of the investigators. Six government entities empowered to probe corruption have got the authority to submit charge sheets to a court upon completion of their respective investigations.

Moreover, acknowledging the fact that the biggest source of IFF is trade, Bangladesh has outlined a guideline to combat Trade-Based Money Laundering (TBML). The country has also developed a National Strategy for Prevention of Money Laundering and Combating Financing of Terrorism 2019-2021 with 11 (eleven) strategies with 137 actions.

In fact, the spread of the coronavirus has taught us that criminal networks are extremely innovative and resourceful, and the only way to address the threat of illegal trade is a co-ordinated global campaign to inform consumers about the consequences of buying cheap or untaxed goods.   

The writer is a financial analyst. mohsena@detempete.com

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