Suspicious transactions in banks

There seems to be a fresh noise around suspicious transactions in the banks and financial institutions.

Having audited many banks' books or operational failures in the emerging countries especially those who have large informal or shadow economy and not so hailed for their economic governance model or internal governance within the banks, I am not at all surprised.

The just-released annual report of the Bangladesh Financial Intelligence Unit (BFIU) is a loud reminder of how the country's financial sector continues to languish in disarray despite frequent calls over the years especially by the development partners for ensuring discipline and regulation in the financial sector.

According to the report, at least 14,106 incidents of suspicious transactions and financial activities were reported in 2022-23 fiscal year, which marks a 65 percent rise from the previous year's numbers.

Of these reports, 91 percent came from banks and the rest from non-bank financial institutions (NBFIs), capital market intermediaries, remitters and others.

The agency boss seemed to be intellectually constipated while he mentioned the sharp rise in suspicious reports does not necessarily indicate a rise in irregular financial activities.

We find it hardly convincing, especially given the frequent media reports of illicit activities and forgeries in banks and financial institutions.

The report also mentioned how trade-based money laundering has not seen any substantive decline because of banks' reluctance to check pricing anomalies or revalidate the prices.

And 85 percent of the money laundering took place through trade mostly cross-border trades.

The question is why does this situation continue to persist rather increasing in recent years?

We have known for a long time that trade mis-invoicing is a major avenue for syphoning off money.

Yet there has been no effective step from the agencies concerned to prevent it.

In this regard, one would obviously want to know the extent of the BFIU's authority as the country's anti-money laundering agency.

Is it supposed to just compile reports of suspicious activities and forward them to other relevant agencies?

Is not it supposed to track all avenues of money laundering and take adequate steps to curb it?

From the look of things, we cannot help but assume that either the BFIU has capacity issues with regard to what it is supposed to do—legally and/or logistically—or its authority is deliberately curtailed while being actioned.

This is further reinforced by the statement of the BFIU boss that strong political will is needed to deal with money laundering, particularly cases involving the biggies.

We know for sure, without bringing the biggies to task, no measures are going to yield results rather create double standards to continue.

Money laundering has long been draining our economy, accentuating the dollar crisis and other financial woes.

We, therefore, for the sake of bringing minimum accountability in the financial management demand proper investigation into all suspicious financial activities reported to the BFIU and urge the government to empower the agency so that it can function as a proper financial intelligence organisation with full independence and credibility.

We also urge the government to urgently take necessary reform measures being recommended by local financial sector experts to bring discipline to this sector.

Political harnessing of the wrongdoers or 'close to the regime' must stop.

The central bank as such the government should make sure all suspicious transactions are being dealt with deep-dive efforts and like in other similar countries investigated by forensic experts instead of retired government or judicial officials who may not have proper or full visibility of the nature of financial crimes happening in recent times, especially in the era of technology.

This is also very much aligned with our vision of a smart Bangladesh focusing on least possible cash transactions or building a cash-less society.

Mamun Rashid is an economic analyst.