Bangladesh may enter list of risky nations again

Bangladesh runs the risk of being reclassified as a country exposed to money laundering and terror financing because of slow implementation of laws on battling illicit flow of funds.

The Asia/Pacific Group on Money Laundering (APG), the global body that ranks countries, acknowledges that Bangladesh has formulated laws but there are problems with their implementation.

If the country cannot improve its rating in at least two indicators of the Bangkok-based body by July this year, the country will again be branded as a risky nation, said officials at the Bangladesh Bank and the Banking Division. 

Around two years ago, Bangladesh was dropped from the APG list of risky countries.

The APG has sent a draft assessment of the country's efforts against money laundering and terror financing to the Bangladesh Financial Intelligence Unit (BFIU) under the central bank.

Among the 11 indicators of the APG, Bangladesh was marked substantial in one indicator, moderate in five, and low in the remaining five, according to the draft assessment.

The final decision will come at the annual meeting of the APG in July. But before the meeting, officials of the APG and Bangladesh government will meet next month.

Bangladesh's response to the APG draft assessment will determine whether the country's status will be demoted.  

The BFIU, which leads the country's efforts against money laundering and terror financing, has sent letters to the home ministry and the Banking Division, informing them about the impending risk of being rebranded as a risky country. 

If everything remains the same, Bangladesh will be branded as a “risky” country, said the letter. 

Bangladesh will have to improve its rating in two indicators from “moderate” to “substantial” to avoid demotion, it said. 

Seeking anonymity, a BFIU official said, “We will get time to make improvements in the problematic areas till July. We hope everything will be fine till then and the country's status will not be downgraded.”

In a letter to the senior secretary of the home ministry on March 23, the BFIU said though Bangladesh's technical compliance was good, the implementation of the technical terms was not up to standard.

Dhaka has formulated national risk assessment report on how to fight money laundering and terror financing, and prepared National Strategy Paper 2015-17.

But the APG said the strategy paper has not explained clearly how to deal with terrorist financing, and no national strategy has been formulated, according to the BFIU letter.

The BFIU will now sit with the ACC, the National Board of Revenue, the Banking Division, law enforcement agencies and other government departments to take urgent steps to retain the country's present status.

If a country scores low and moderate in nine or more indicators, it is classified as a risky country under the International Cooperation Review Group (ICRG) of the APG.

And if it scores low or moderate in eight or less number of indicators, it is included in the list of countries that have implemented the indicators of the Financial Action Task Force (FATF).

The APG is an autonomous and collaborative international organisation founded in 1997 in Thailand with 41 members and a number of international and regional observers.

Bangladesh is a founding member of the APG.

The APG website says Bangladesh is currently strengthening its AML/CFT system. The country, a party to the UN Vienna Convention 1988 and the UN Terrorist Financing Convention, has enacted an anti-money laundering law with respect to serious offences and reporting suspicious transactions.

In 2002, Bangladesh became the first country in South Asia to promulgate Money Laundering Prevention Act in line with the recommendations from the FATF, an intergovernmental organisation which combats money laundering.

Bangladesh got membership of the Egmont Group, a global network of financial intelligence units, in 2013. The country also came out of FATF's grey list in 2014.

A delegation of the APG visited Bangladesh last October to inspect different initiatives to restrict money laundering and terrorist funding.

During the visit, the team couldn't get any clear idea about which government agency leads probes in lawsuits over money laundering and terror financing.

After the team left Bangladesh, the government made moves to resolve the issue, and reformed laws, giving the Anti-Corruption Commission the responsibility for probing corruption issues and the Criminal Investigation Department (CID) of police for investigating money laundering issues, officials said.

At its meeting with Bangladesh officials in October last year, the APG team raised questions about recent major irregularities in the financial sector such as Hall-Mark scam and BASIC and Sonali Bank scams as well as sluggish pace in investigation.

An APG delegation is expected to visit Bangladesh from May 2 to 4 to finalise the draft of the assessment report.

In the upcoming meeting, the APG may raise questions about the recent incidents of ATM fraud and the $101 million BB reserve heist, said officials at the BB and the Banking Division.

They said the government would inform the APG about the measures taken since the last meeting, and also point out the external non-cooperation they faced in stopping hackers from looting the BB money.

Experts say though Dhaka has formulated strong laws against money laundering, it is failing to stem the outward flow of money.

For example, $55.58 billion was siphoned off from the country between 2004 and 2013, according to Washington-based research and advisory organisation Global Financial Integrity.

BB officials said there are scopes for Bangladesh to improve in the second and sixth indicators of the APG.

The second indicator assesses performance in terms of exchanging accurate information internationally, financial intelligence programme, and action taken against terrorists and their assets.

And the sixth indicator takes into account how effectively countries use information gathered through financial intelligence and other activities in preventing money laundering and terror financing.

A number of experts said if Bangladesh is labelled as a “risky country” again, it may have an adverse impact on its foreign direct investment. Local firms will also find it difficult to borrow from abroad and the interest rate on external borrowing may also go up.