THE syphoning of money has been a hot topic in Bangladesh and many reports have been published in the aftermath of the 2024 political changeover as many stalwarts of the then ruling party were accused of transferring money abroad illegally. Syphoning out money from one country to another is a common method of money laundering. Money laundering simply means hiding the money earned by illegal means and making it look like it came from a legal business.
Money launderers get the proceedss from criminal activities which are known as predicate offences such as bribery and drug sales, manipulate the share market, transfer the laundered money from Bangladesh to other countries illegally and repatriate the money into the country giving the appearance that the money comes from abroad as remittance or investment, dodging taxes, etc. In essence, money听laundering proceeds come from illegal or unlawful activities and re-enter the economy through the financial system with complex processes.
Money laundering in the form of听syphoning is a great concern for developing countries such as Bangladesh. According to a 2021 report of the Global Financial Integrity, a Washington-based non-profit organisation, around $61.6 billion was illicitly transferred out of the country between 2005 amnd 2014 through misinvoicing of trade documents and others common methods of capital flight. The report also states that Bangladesh loses around $8 billion each year which was equivalent to Tk 80,000 crore. The money听has been siphoned off to different destinations such the United Arab Emirates, Singapore, the United Kingdom, Malaysia, the United States, Canada, Switzerland and tax havens such as Cayman Islands, Panama, British Virgin Islands, etc.
Capital flight or syphoned out money or assets deplete the foreign currency reserve, reducing tax revenue collection and weakening the economy. A recent white paper on the state of the economy published by the government shows that $234 billion was syphoned off Bangladesh between 2009 and 2023. Reports published in various news outlets that the S Alam group has syphoned out from the country capital worth more than Tk 2 lakh crore, equivalent to around $ 17 billion, taking out loans from various banks making shell companies听or fictitious documents.
A new report also appears against the then ruling party鈥檚 minister who bought assets of 350 houses worth around Tk 3,500 crore in the United Kingdom and also in Dubai through ill-gotten money which is supposed to to have been done through kleptocracy. It is apparent that money laundering through syphoning has been experienced during all governments, sometimes with the connivance of the political regime.
The capital flight from the country to different overseas destinations are happen through vrious mechanisms. Capital flight mainly happens through trade. Trade-based money laundering is a method by which a big chunk of money flows out of the country. it is said that almost 80 per cent of the money laundering or capital flight happens through trade mechanisms such as over-invoicing in export, under-invoicing in import, ghost shipment, phantom shipment, multiple invoicing, etc.
Money laundering also occurs through informal channels such as hundi, cash smuggling and gold trafficking. Under the hundi system, remittances do not come to Bangladesh from abroad through the formal banking channel and they do not add to the foreign country reserves.
Recovering laundered money from abroad is a difficult task. It requires significant time, legal procedures and cooperation of foreign governments and international organisations. Over the years, we have just one successful example where syphoned off money was returned from Singapore 鈥� Tk 230 million in Singaporean dollars 鈥� after the Anti-Corruption Commission had put in the required efforts. Apart from this, the Bangladesh government could repatriate $1.3 million in stolen assets against the UK requests in two cases between 2010 and 2015.听 However, recovering stolen assets from abroad needs strong government commitment and will. It is not an easy task. The government has to go through long and complex legal procedures. Moreover, it is quite difficult to trace the stolen assets abroad and collect proofs that the money were laundered from the country.
In every country, there is a central authority responsible for overseeing the money laundering and terrorist financing activity. In Bangladesh, the central听 authorities, the Bangladesh Financial Intelligence Unit, collect data from the various reporting authorities such as financial institutions ie banks, non-bank financial institutions, insurance companies, accountants, legal firms, currency exchange houses, etc and听 then they analyses the information coming as cash transactions report and suspicious transactions report and if they suspect any laundering activity, they disseminate the information to the enforcement agencies for investigation and legal action against individual and entities. The Financial Intelligence Unit can freeze bank accounts if it suspects any money laundering and terrorist financing, etc.
The enforcement agencies are the Anti-Corruption Commission, the Criminal Investigation Department, the National Board of Revenue, customs authorities, the Securities and Exchange Commission, the narcotics department, etc. Based on the nature of laundering, the information is disseminated to the authorities concerned. Cooperation among the departments are crucial and imperative for expected results in tracing and taking legal action against money launderers and repatriating the laundered money from abroad.
In order to recover funds from another overseas jurisdiction or countries, it is necessary to make cooperation with other countries. In most of the cases, Bangladesh has no treaties or agreement of cooperation with major laundering countries or the countries are not willing to make treaties or agreements. Under mutual legal assistance treaties, known as听MLAT, both the countries sign treaties or agreements that they will cooperate each other and share evidence, etc when asked for. Both the countries can share information on laundering activities which help to trace laundered money, freeze and confiscate the syphoned money or assets and repatriate them.
Apart from MLAT country-to-country cooperation, the government can seek help from some organisations that work on the prevention of money laundering. The Egmont Group is an organisation of foreign financial intelligence units of different countries. Bangladesh is a member听of the group. Information on the laundered money or assets can be shared through members of the group for cooperation.
The Financial Action Task Force is a global standard-setting body on money laundering and terrorist financing. They have made a global standard of anti-money laundering and counter financing of terrorism regulations which are followed by member countries. The Financial Action Task Force has similar regional bodies and Bangladesh is a member of one of its regional bodies known as the Asia/Pacific Group on Money Laundering. Bangladesh can take help from this body in order to recover stolen assets.
The United Nations Convention against Corruption works on recovering syphoned off money or assets through member countries. Bangladesh can seek help from the United Nations Convention against Corruption in the recovery of its stolen assets or money.
There is another way that Bangladesh can get back its stolen assets. Bangladesh can repatriate stolen assets through the Stolen Asset Recovery Initiative, a joint initiative of the World Bank and the United Nations Office on Drugs and Crimes. The Stolen Asset Recovery Initiative helps countries to trace, freeze and recover illicit assets hidden abroad, particularly those siphoned through corruption.
Syphoned-off money or capital has long-lasting impact on the economy and people. Transferring assets illegally from Bangladesh has made the economy fragile. The Financial Intelligence Unit has to be strengthened and empowered and given logistic support. The law enforcement agencies should be given enough training, resources and be empowered so that they can combat the crime and handle money laundering cases efficiently. Reporting agency officials should be trained well so that they can report CTR and STR to the Financial Intelligence Unit timely and efficiently. In order to recover the stolen assets or laundered money, the government should immediately start the process of mutual legal assistance treaties with foreign counties and communicate with international organisations to repatriate the money or assets back. The government can also appoint foreign experts in recovering stolen assets.
听
Mohammad Zonaed Emran is a banker.
