Money Laundering, ACC & Weak Banking Regulation
December 31st, 2020 at 11:33 am
Money Laundering, ACC & Weak Banking Regulation

by Omer Selim Sher in Ottawa

Adieu to the worst year 2020 in terms of health, economy, and politics. Despite being the worst year for the world, Bangladesh has performed well in the GDP growth rate of 5.23% in 2020 and completed a significant milestone, the structural part of “Padma Bridge.”

We improved in all social indexes, beating almost all the South Asian countries. Controlled Covid-19 very prudently and ranked 20th among all the nations and 1st among the South Asian countries.

Despite all these good performances, the corruption, bank loan defaulter, and money laundering continued to hit a scary level, which was not desirable for our hard-earned blood-stained liberation.

Bangladesh ranked the 45th in 2020 and 82nd in 2017. Here, lower rank indicates a higher risk for money laundering. Bangladesh’s money laundering risk score is higher than the global average risk score of 5.22 this year.

In a recent ruling,the High Court ruled that the Anti-Corruption Commission (ACC) and six other government agencies should submit a list of “money launderers” to the court by December 17, 2020.

On December 17, the ACC and four agencies submitted to the court a list of the names of 100 capital smugglers and a list of the smugglers worth Tk 2,500 crore. However, the court ruled that the presentation was negligent and directed that a full list of money launderers and dual citizenship holders in Canada and the United States be submitted by February 28, 2021.

The list did not reflect reality. Global Financial Integrity (GFI), a US-based research firm, says that over the past decade, an average of $7.5 billion (about Tk 64,000 crore) of capital has been smuggled from Bangladesh to various countries every year, while the ACC has listed only Tk 2,500 crore!

GFI has also identified four main capital smuggling methods: 1) massive over-invoicing in import trade, 2) under-invoicing in export trade, 3) smuggling of export earnings abroad, and 4) smuggling of bank loans abroad through the hundi process or illegal transfer of funds. In particular, the widespread use of the hundi system in sending remittances to the country of 12 million expatriate Bangladeshis has recently led to a dramatic increase in bank loan smuggling through the hundi process. The hundi process allowed the country’s large industrialists and business people to control the bank loan monopoly before the coronavirus epidemic hit. After March 2020, this hundi process has slowed down.

Since the lion’s share of defaulted loans has been smuggled abroad, these defaulted loans can never be repaid to the banks. Those who are responsible for suppressing the ‘Big Fish debt defaulters’ are the ones who are hiding the defaulting debt problem under the carpet with the opposite policy due to sectarianism. That is why the defaulted loans of the country’s banks have exceeded Taka 3 lakh crore, but Bangladesh Bank is showing the latest published amount of classified loans of Taka 95,000 crore through various rules and regulations

Bank borrowers whose names are on the list should be immediately blacklisted from all banks and declared permanently disqualified from bank loans. If they default, they will have to cancel the loan rescheduling opportunity. There must be a technical team of the Bank to visit the site to warrant consecutive rescheduling.

All should keep in mind that most of the defaulting borrowers   are ‘intentional defaulters’; they cannot be brought back on the path of repaying their loans. Such borrowers are smuggling significant amounts of bank loans abroad, and they have bought houses and businesses abroad and taken them abroad. Their wives, sons, and daughters are living abroad; they are smuggling capital by maintaining business and employment in this country by continuing to go and come abroad.

Although ACC delayed the Foreign Minister’s recent statement and the High Court ruled, the issue has come to the people’s notice.

Suppose the ACC really wants to tackle money laundering. In that case, it will have to change its efforts to gather information on money laundering by sending letters to the country’s embassy or high commission through the foreign ministry.

While Bangladesh’s hundreds of “robber barons” are the main looters and money launderers. The list also includes thousands of corrupt civil servants, engineers, military officers, bankers, politicians and son of bank loan officers, garment owners, businessmen-industrialists’.  These people are mainly settling in the United States, Canada, UK, and other European countries, Middle East, Australia, Malaysia, Singapore, and India. They have smuggled billions of taka worth of capital into these countries to gain dual citizenship, green cards, and permanent residency.

Although Canada’s ‘Begum Para’ or Malaysia’s ‘Second Home’ has been widely publicized as a symbolic destination for capital smuggling from Bangladesh to foreign countries, the ‘capital smugglers’ of this country have established a large base in all the countries mentioned above. Would it be very costly for the ACC to send its investigation team or research team directly to these countries to find these smugglers?

The cabinet could remove politicians whose names are on the list of capital smugglers and from party leadership. If the MPs’ names are on the list, suspend their membership, and file a case against them. If there is a name on the list, the ACC will file a lawsuit against the retired government officials.

Although it is questionable whether the government has the will or ability to bring the money launderers to justice. Whether the Govt repatriates smuggled capital at all or not, collecting their names and addresses with due priority and disclosing them will create the opportunity to guard against the future flight of capital.

In 2021 with a lot of optimism, we want to see less corruption,zero money laundering, and complete control over law and order. We also optimistic for universal primary education for all, restructuring the entire education system into one.



Omer Selim Sher is a retired Professor of Economics at Algonquin College, Ottawa, Canada, and a researcher on South Asian politics.