Anti-money laundering mechanisms versus the reality of Bangladesh

According to Global Financial Institute (GFI) - a Washington-based think tank - $61.6 billion was siphoned out of Bangladesh between 2005 and 2014. In 2015 alone, about $5.9 billion was laundered out of the country. The GFI reveals that on an average, $7.53 billion is laundered each year and accordingly from 2016 to 2020, around USD 37.65 billion has been laundered. 

The GFI ranked Bangladesh among the top 30 countries globally with around 20% of its international trade value being siphoned out of the country every year. The alleged hot spots are the UK, USA, Canada, Saudi Arabia, Singapore, Malaysia, Switzerland, Thailand, Australia, Hong Kong and so on.      

Unsurprisingly, the exponential growth in money-laundering has become a serious threat to Bangladesh's rising economy, hindering economic good governance and social justice. It has turned into a safe avenue for white-collar criminals, i.e., business tycoons, corrupt politicians, public officials and their criminal enterprises. 

Individuals and institutions with such heinous criminal records are politically and socially influential, roaming freely without remorse, which is enabled by questionable political dynamics as well as deplorable enforcement of legal norms in curbing such offence.  

According to an annual report 2020 of the Basel Institute of Governance, a not-for-profit Swiss Foundation under Basel University, Bangladesh is among the top 40 countries in the world in terms of risk for money laundering and terrorist financing. 

The country ranked 38th among 141 countries on the Basel Anti-Money Laundering Index of 2020. Moreover, the US-based International Consortium of Investigative Journalists (ICIJ) published - in the Panama Papers in 2016 and the Paradise Papers in 2017 - a long list of Bangladeshi money launderers. Bangladeshi media also reported many names of money launderers at various times. 

The Swiss National Bank (SNB) in its annual report on 17 June this year, disclosed deposits of Bangladeshi nationals totalling CHF (Swiss Francs) 563 million or about BDT 52.15 billion. In South Asia, Bangladesh is in the third position in deposit lists next to India and Pakistan. In Switzerland, as per section 47 of the Federal Act on Banks and Savings Banks, 1934, the confidentiality of individual depositors is strictly maintained and consequently, no name of any depositor is disclosed. 

The GFI focuses on four ways of money laundering, namely, over-invoicing of imported goods, under-invoicing of exported products, Hundi, and Voice Over Internet Protocol (VOIP) business. 

Major underlying factors accommodating money laundering include, undue political influence of the launderers, a poor environment for investment, massive corruption in the governance system, absence of rule of law, poor public transparency and accountability, inefficiency in surveillance of the state apparatus, lack of coordination among responsible institutions, as well as lack of enforcement of existing laws. 

It also points out that 80% of total money laundering from Bangladesh is Trade-Based Money Laundering (TBML) due to over and under-invoicing. Another study finds weaker national mechanisms for the criminal justice system, the financial regulatory system and transnational collaboration may keep anti-money laundering authorities dysfunctional.   

Finance Minister AHM Mustafa Kamal in a national parliamentary session on June 7, 2021, said that he does not have the list of money launderers pointing to the notion that some people launder money out of excessive greed for wealth while others are criminal by nature. To combat money laundering, he should take a serious stance as part of the ministerial oath, and guide the concerned regulatory bodies proactively so that they remain hawk-eyed and result oriented. 

Illustration: TBS

Bangladesh was the first country in South Asia to enact the Money Laundering Prevention Act, 2002 as part of advice of the G7 based Financial Action Task Force (FATF), an intergovernmental body formed in 1989 to combat money laundering and financing of terrorism. In 2008, the Money Laundering Prevention Ordinance was promulgated. 

Again the Money Laundering Prevention Act (MLPA), 2012 was enacted repealing the Ordinance. Still, there are scanty penal provisions under the law. Section 4(2) stipulates punishment from four to 12 years of imprisonment along with a two-fold fine of property value or Tk2 million (previously Tk1 million). Section 17(1) provides a provision for confiscation of property within or outside the country subject to conviction by the court.  

Under the MLPA, 2012, the Bangladesh Financial Intelligence Unit (BFIU) was formed as a key authority replacing the Anti-money Laundering Department under the Bangladesh Bank (BB) to deal with money laundering-related crimes. 

Nevertheless, the MLPA, 2012 was amended in 2015 to empower the National Board of Revenue (NBR), Anti-corruption Commission (ACC), Criminal Investigation Department (CID), and other entities like the Customs Intelligence and Investigation Directorate (CIID), Department of Narcotics Control (DNC), Department of Environment (DoE) and Security and Exchange Commission (SEC) to investigate certain money laundering cases. 

There is also a Money laundering Prevention Rules, 2019 which has categorised 27 types of corruption relating to money laundering. On 10 March, 2021, the Finance Ministry issued an Order based on the Foreign Exchange Regulation Act, 1947 to impose seven years of imprisonment for the wrong declaration on exports, imports and investment abroad by businessmen. The Order will remain effective until December 2026.  

Theoretically, there is hue and cry about zero tolerance of corruption, money laundering and other financial crimes. In practice, however, no sustained initiatives or actions are paving the way for good economic governance and rule of law. 

About 408 money laundering cases are pending in various courts. There is no visible success of the BFIU, ACC and NBR in bringing back the laundered money, underscoring the need for the enhancement of their capability, skills, and professionalism along with institutional autonomy. 

Notably, Bangladesh as a founding member of the 1997 Asia Pacific Group (APG), an anti-money laundering body consisting of 41 members and several international and regional observers - including the United Nations (UN), World Bank (WB) and International Monetary Fund (IMF) - can take concerted initiatives to control money laundering. Similarly, stringent compliance of the 40 recommendations suggested by the G7 based FATF can be a handy way out in restraining money laundering and terrorist financing. 

Furthermore, the UN Convention against Corruption (UNCAC), 2003 in which Bangladesh has been a state party since 2007 can be an opportunity to seek help from destination member countries to recover stolen assets. 

Since 2013, Bangladesh as a member of the Egmond Group, can pursue international cooperation to make ends meet. The Egmond Group is a global body formed in 1995 to fight money laundering and other financial crimes with Financial Intelligence Units (FIUs) in 166 member nations under respective central banks. 

From Henry Kissinger's basket case, the economy of Bangladesh has risen to a new height over the last five decades and now the country has the 37th largest economy in nominal terms and the 31st based on Purchasing Power Parity (PPP). The economy will be booming faster if the country can control money laundering successfully. 

The only success of the recovery of a small portion of laundered money was from Singapore during the FY 2007-2008 by the military-backed caretaker government. Yet, we hope that good sense will prevail among the rulers so that they take timely action to bring perpetrators to justice soon.

Emdadul Haque is an Independent Human Rights Researcher and Freelance Contributor based in Dhaka. Email: ehaqlaw@gmail.com and Twitter: @emdadlaw

Dr Kudrat-E-Khuda Babu is an Associate Professor and Head of the Law Department at Daffodil International University, Bangladesh. He can be reached at: kekbabu@yahoo.com  

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.