The forex coffers were forecast to drop to US$37 billion in early September, from $48 billion in July 2021, raising the spectre of a potential crunch akin to the crises seen in South Asian neighbours Sri Lanka and Pakistan.
An economy-sapping combination of inflationary pressure from the Ukraine war, stagnant exports, rising imports and falling remittance inflows has focused renewed attention on the staggering sums of money that go missing every year.
From 2009 to 2018, Bangladesh is estimated to have lost an average of US$8.27 billion annually through “trade misinvoicing”, according to a report published late last year by US-based watchdog Global Financial Integrity.
The organization says importers and exporters “deliberately falsify the declared value of goods on the invoices they submit to their customs authorities in order to illicitly transfer money across international borders, evade tax and/or customs duties, launder the proceeds of criminal activity, circumvent currency controls, and hide profits in offshore bank accounts”.
Bangladesh’s finance minister AHM Mustafa Kamal recently blamed money laundering for contributing to the nation’s large trade deficit, which widened by nearly 28% to US$22.8 billion in the fiscal year that ended in June. “We’ve instructed different regulators and they are taking action so that imports and exports are done honestly and responsibly,” he said, according to local media.
Until now, the authorities have largely concentrated on money funnelled into banks in Switzerland – so far to little avail. The Bangladesh Financial Intelligence Unit (BFIU) recently said it had sought information from Swiss institutions on 67 Bangladeshi nationals allegedly involved in money laundering but obtained help in only one case.
Foreign secretary Masud Bin Momen recently said Bangladesh is in constant contact with Switzerland to develop a mechanism for exchanging information on money launderers.
But officials are also looking to cast a wider net while rolling out a series of measures to hunt for funds or entice people to bring their cash home.
One area of interest is Malaysia – where thousands of well-to-do Bangladeshis have taken advantage of the Second Home programme that essentially lets individuals settle or retire as long as they can bring in tens of thousands of dollars. These transfers are typically done through informal means.
The government is also seeking information on purchases of real estate in Canada and money believed to have ended up in the UK, US, UAE, Hong Kong, Singapore and many other locations.
As a member of the Egmont Group of Financial Intelligence Units, a global body that facilitates intelligence sharing, Bangladesh does receive some info on money launderers from other member countries, but there are limitations on using that information in the justice system due to privacy restrictions.
Secretary Momen recently held an interministerial meeting where participants decided to work on developing a mechanism to use such information when taking legal action.
The meeting also discussed the possibility of signing mutual legal assistance treaties (MLATs) with countries where high volumes of laundered money appear to be flowing, to expedite diplomatic efforts to obtain information.
The government has drafted guidelines for a “legal framework and strategic process for laundered asset recovery” under which it plans to confiscate unreported offshore assets soon after their detection and repatriate them through joint investigations with the countries in question.
Moreover, Bangladesh plans to seek cooperation from the United Nations Office on Drugs and Crime (UNODC), the International Centre for Asset Recovery and other bodies to bring back money, the guidelines say.
At the same time, the government is trying a strategy of forgiveness in the hope of replenishing the forex reserves. Finance minister Kamal in the current fiscal budget allowed Bangladeshi nationals to bring undocumented money from abroad by paying only 7% tax. The central bank has repeatedly asked commercial banks to promote the program to their customers.
Either way, experts have mixed views on the prospects for success.
According to the Bangladesh Anti-Corruption Commission, at least 2,952 corruption and money laundering cases are passing through the courts.
But there are relatively few examples of Bangladesh succeeding at recovering laundered funds.
In one case, money was retrieved from Singapore, where a politician had hidden US$2.2 million he received from Siemens Bangladesh as a bribe. The German industrial giant pled guilty in 2008 to violating the US Foreign Corrupt Practices Act.
In addition, after hackers stole US$101 million from the country’s forex reserves in 2016, around US$20 million has been recovered from Sri Lanka and less than that from the Philippines.
Iftekharuzzaman, executive director at Transparency International Bangladesh, who goes by only one name, said bringing back the US$2.2 million from Singapore is an example that if Bangladesh takes proper steps in line with international laws and mechanisms, it is possible to find and recover laundered money.
“Signing a Mutual Legal Assistance Treaty and adoption of Common Reporting Standards for automatic exchange of information on financial transactions can help Bangladesh in this case,” he told Nikkei Asia.
But he warned that there may be political resistance keeping Bangladesh from succeeding, as in many cases, the launderers are influential and politically powerful.
Abu Hena Mohammad Razi Hasan, former head of the BFIU was even more sceptical, warning that bringing back laundered money is “very difficult” unless other governments cooperate.
He said the bribery involving Siemens Bangladesh was first detected by the US monitoring system, and a case was filed in Singapore, where US officials’ testimony helped.
Otherwise, Hasan said, “the rate of success in money laundering cases is very low”, noting that Bangladesh has signed MLTAs with “only a few countries so far”.
Still, he said, “having a bilateral treaty helps to get the assistance of other countries and prevent money laundering”.