Money without a trail

While Bangladesh's economy has grown, the Swiss coffers of the super wealthy have easily outpaced and inevitably outgrown that growth. Between 2004 and 2019, the compounded annual growth rate of Bangladesh's real GDP was 10.78 percent (current USD rate). During the corresponding period, deposits to Swiss bank accounts from Bangladesh increased from Tk 3.65 billion in 2004 to Tk 53.67 billion during 2019. Given the constant reports of the financial shenanigans of the influence-mongers, one can't help but wonder how much of it has gone through legal channels.

And people from every sphere of the sociopolitical spectrum seem to have a hand in it: from politicians and government officials to prominent industrialists and small scale operators—all have significant involvement in one of the most widespread financial crimes that is money laundering. And of course, there are the more recognised criminals: drug traffickers, human traffickers, terrorists and the likes thereof.

In 2020 itself, two prominent money laundering scams did the rounds on the media. First, the curious case of PK Haldar, whose ingenious laundering of Tk 10,200 crore to countries such as Canada and Singapore would tempt any film scriptwriter and second, the criminal activities of a lawmaker, who along with his lawmaker wife and relatives, was not only involved in money laundering, but also in the more sinister crime of human trafficking.

According to media reports, between 2016 and 2020, Tk 355 crore was transacted from around 500 bank accounts of the independent lawmaker for Laksmipur 2 Mohammad Shahid Islam Papul and his associates. Papul's wife, reserved-seat independent lawmaker Selina Islam, their daughter and close relatives were all allegedly involved in this. They made their fortunes through human trafficking.

These figures seem incredible, but they are only two of the many money laundering incidents that have taken place this year. In fact, it took the authorities years to even detect them. From the more all-pervasive "hundi" to the more sophisticated trade-based mechanisms, capital flight takes place every day and in many forms. While most are deprived of their fair share of media exposure, some, such as PK Haldar or MP Papul, do get their 15 minutes of fame.

A Transparency International Bangladesh (TIB) report from earlier this year suggested that around USD 3.1 billion (Tk 26,400 crore) is laundered out of the country every year. A 2018 IMF study reported that underground economic activities in Bangladesh accounts for about 30 percent of its GDP. Most of the black money invariably, and understandably, fly abroad.

In the Basel Anti-Money Laundering (AML) Index 2020, Bangladesh fell to 38th position from 45th in 2019 among 141 countries. This means the country is more vulnerable to the crime of capital flight. And trade based capital flight remains a major headache for Bangladesh. According to the Global Financial Integrity report ranking, Bangladesh is one of the top countries facing trade-based money laundering (TBML).

Given the stats, one might easily wonder why the regulators are not able to rein in the situation. "This is the failure of the government agencies responsible for combating money laundering. However, it is difficult to tell from the outside if this is due to their incapability or involvement in capital flight. The cases of PK Halder or Shahid Islam (Papul) are just the tip of the iceberg," suggested prominent banker, economist and former deputy governor of Bangladesh Bank Khondkar Ibrahim Khaled.

He further added that addressing the problem of capital flight is one of the direct responsibilities of the Bangladesh Financial Intelligence Unit (BFIU). "If the agencies are not being able to do their jobs, then the government, the cabinet, should make them accountable for their failures. The existing rules are sufficient to tackle the problem of money laundering; we need the right enforcement."

BFIU, however, seems have its own limitations. "Our core task is to collect suspicious transaction reports, analyse the information and share them in intelligence format with law enforcement units so that they can investigate," said Abu Hena Mohd Razee Hassan, head of the Bangladesh Financial Intelligence Unit.

BFIU was formed as part of compliance with recommendation 29 of the Financial Action Task Force, that says, "Countries should establish a financial intelligence unit (FIU) that serves as a national centre for the receipt and analysis of: (a) suspicious transaction reports; and (b) other information relevant to money laundering, associated predicate offences and terrorist financing, and for the dissemination of the results of that analysis. The FIU should be able to obtain additional information from reporting entities, and should have access on a timely basis to the financial, administrative and law enforcement information that it requires to undertake its functions properly."

Under the Money Laundering Prevention Act, there are 27 categories of financial crimes. Based on the nature of the crimes, BFIU sends intelligence reports to different relevant agencies. For instance, if the crime is related to corruption and bribery, the report is sent to the Anti-Corruption Commission. For forgery and related crimes, intel goes to the Criminal Investigation Department; for trade based money laundering, including over-invoicing, under-invoicing, tax evasion and related financial crimes, information is shared with the National Board of Revenue. For financial crimes related to drugs, the Narcotics Control Department is alerted. In case of financial crimes related to stock exchanges, intel is shared with the Bangladesh Securities and Exchange Commission "for further investigation and taking it to prosecution", added Abu Hena Mohd Razee Hassan.

Once intelligence is shared with the agencies, it is up to them to carry forward the investigation and take subsequent action to bring the culprits to book.

With regard to combating trade-based money laundering, BFIU has issued the Guidelines for Prevention of Trade Based Money Laundering in 2019. Abu Hena Mohd Razee Hassan believes that if these guidelines are strongly implemented by all relevant authorities, it would play a major role in curbing trade-based capital flight. But BFIU can only do so much. The investigative and enforcement authorities need to be more prompt, efficient and honest in taking immediate action on the intel shared by the BFIU. Any delay in this is only going to aggravate the condition, despite the formation of new units or issuance of new guidelines.

To sum it up, Bangladesh's turbulent tussle with capital flight is not going to end anytime soon. While the country has made some progress in addressing the various forms and mechanisms of money laundering, rooting it out is a long journey ahead, and the reason is simple: the country needs more proactive coordination between intelligence units and enforcement agencies, and a strong political will to end this problem once and for all.

The enforcement agencies need to address this problem with an iron fist, and for this they would need strong backing from the government, since a lot of the money launderers flaunt financial and political muscle. If the influential money launderers—irrespective of their political affiliations—are brought to book, it will send a strong and clear message to not only the financial criminals but also the enforcement agencies. As the new year approaches, one can only hope despite the many challenges, the government and the enforcement agencies would be more active in eliminating the ailment of capital flight.

Tasneem Tayeb is a columnist for The Daily Star.

Her Twitter handle is: @TayebTasneem