The Swiss Banking authorities published their annual update on deposits of foreign nationals, including Bangladeshis, on June 25. It shows 603.2 million Swiss Francs or Tk 5,367 crores invested by Bangladeshis, which is 2.38 percent less than that in 2019. The decline is negligible, while it shows a persistent trend of capital flight from the country through illicit financial transfers. A tiny portion may be deposits out of legitimate income of Bangladeshi nationals staying abroad. However, there is no doubt that illicit transfers account for the overwhelming share.
The Swiss data shows only a tip of the iceberg. Information on illicit transfers to many more destinations, especially offshore islands, and quite a few countries of South, East and Southeast Asia, are not disclosed. The regular disclosures by the Swiss Banks, the conventionally most attractive destination of global illicit financial transfers, may be making other destinations more attractive to smarter money launderers, though the Swiss would also share more specific data like who, how much, when and in what process, only if the government at source so requests in the due process.
The lion's share of money laundering takes place through misinvoicing in international trade. In addition, in case of Bangladesh, recent TIB studies have shown at least two more channels of illicit financial transfers. One by recruitment agencies for Bangladeshi expatriate workers to various countries, especially Middle East and Southeast Asia. Another is through the various categories of foreigners working in Bangladesh, mostly in the corporate sector.
In any case, there can be no doubt that the amount laundered from Bangladesh will be much higher than the Swiss figures, in no way less than USD 10 billion a year by most conservative estimates. Taking into consideration the likes of Malaysian Second Home project, of which Bangladeshis are reportedly the third largest group of clients, or Begum Para in Canada, or Panama Papers and Paradise Papers where quite a few Bangladeshis were listed, the estimates are bound to be mind-boggling.
Illicit financial transfers or money laundering is a crime according to both national and international law. Any crime is bound to flourish when laws and regulations are not enforced and violators are not held accountable. This is exactly what has been happening with money laundering in Bangladesh. The relevant laws, especially the 2012 Anti-money Laundering Act (AMLA) has remained a paper tiger. The opportunities created under the UN Convention against Corruption (UNCAC) for Bangladesh, as a state party, being entitled to benefit from cooperation with destination countries to recover stolen assets, have not been seized.
The institutions authorised to prevent and control the crime like the Bangladesh Financial Intelligence Unit (BFIU), created as an example of compliance of UNCAC, have been at best busy explaining why they are not quite in agreement with the disclosed data on money laundering. Precious little has been done by the National Board of Revenue to control misinvoicing, which raises the question whether the protection and promotion of minsinvoicing are an inside job. Unlike well over a hundred countries including some regional neighbours, Bangladesh is yet to adopt the global standard for automatic exchange of information on financial accounts that could facilitate robust tracking of financial flows across borders.
Not much is known about what the relevant law-enforcement agency has done in discharging their entrusted role in this regard. The Anticorruption Commission (ACC) has taken a back seat in the wake of an amendment that unduly curtailed its jurisdiction on money laundering. The Attorney General's Office, which is supposed to be the focal point for initiatives to benefit from arrangements for recovery of stolen assets through Mutual Legal Assistance with destination countries, seems to be too busy otherwise.
The outcome of all these is a practical impunity to illicit transfers. Hardly any action is taken against the alleged perpetrators of the crime as many of them are tied to the power structure and hence determine terms rather than laws and regulations. One example of such state capture can be seen in the 2020-21 draft national budget that proposes to legalise illicit transfers violating national and international laws.
While the 2012 AMLA clearly provides that laundered wealth are subject to confiscation by the state; financial penalty can be up to double the confiscated amount; and the crime can be punishable by 4-12 years of imprisonment, the budget offers to "legalise" laundered income on payment of so-called 50 percent tax. It not only undermines the relevant provisions of the law but also grants blanket impunity and offers an invitation to money launderers to indulge in it more. It further calls upon others to do the same.
Such impunity to illicit financial transfers is suicidal for a country starved of capital and revenue. Those who are behind such state capture are not only maligning public interest, but also undermining the prime minister's pledge of zero tolerance for corruption. Ironically, some of them are also among those entrusted with the responsibility to deliver the lofty commitment.
Bangladesh did succeed once to repatriate laundered asset from Singapore in the same process mentioned above. The question remains if it was possible once, what prevents the same from happening again? It is obviously the political will and its application that matters. The failure to be effective against money laundering is not due to the absence of laws, policies, institutions, regulations, or even capacity and skills; it is about the lack of courage and commitment to ensure accountability without fear or favour and irrespective of identity or status.
Dr Iftekharuzzaman is Executive Director, Transparency International Bangladesh.
The Daily Star, June 29, 2020 Link