Corruption, embezzlement and money laundering are endemic in Bangladesh, but reached new heights during the last fifteen years of the now overthrown Awami League-led regime. The recently published ‘White Paper on the State of Bangladesh’s Economy’ reported that US$234 billion was siphoned out of Bangladesh between 2009 and 2023. The interim government has pledged to work tirelessly to identify the perpetrators of this massive chaos – to loot and plunder the areas. land and its poor people – and return some of its ill-gotten resources.
Tax havens around the world, especially in the Middle East, Malaysia, Britain, Canada, the US, Hong Kong, Malaysia and Singapore, offered companies, bureaucrats and politicians a golden opportunity to implement a well-thought-out system of patronage and crony capitalism to take advantage of the country’s incompetent leaders and financial regulators to launder an average of $16 billion per year.
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The White Paper documented the mechanism used for money laundering (ML). These tricks have been known for a long time. The then Foreign Minister of Bangladesh, during an interview with The Daily Star in 2020, stated that the AL government had information that politicians, businessmen and government officials, including some ‘serving officials’, had stolen and whitewashed money by stealing properties in Canada buy. It is no secret that Bangladesh Bank and the Bangladesh Financial Intelligence Unit (BFIU) were fully aware of the magnitude of ML and the role played by its key players!
The previous government was warned on many occasions by the World Bank, multilateral financial institutions, UN agencies and national watchdogs about the scale of illicit financial flows (IIF). In 2011, during negotiations with the World Bank to secure financing for the Padma Bridge, the bank provided the government with “credible evidence of corruption”. These were brushed aside by the former Prime Minister and dismissed as ‘fabricated’ accusations.
From my brief discussion on this issue with members of the current government, it is clear that money laundering and its prevention are among the highest priorities. Last week, the BB governor publicly reiterated his intention to recover stolen assets from other countries. He chairs a nine-member task force with representatives from key government agencies tasked with locating stolen assets abroad and supporting investigations aimed at recovering them. The Task Force aims to expedite legal proceedings for the recovery of assets, identify and address barriers to recovery, manage frozen or recovered assets abroad and strengthen communications with relevant domestic and international agencies to gather vital information and at the same time improving internal coordination and capabilities.
Although asset recovery is a difficult and time-consuming process, it must be done for many reasons. The money looted from the treasury is now being used to undermine the current government. If we reverse the outflow of resources and turn the tide, it would rejuvenate our economic development. For example, the ML activities of the owners of S Alam Group have resulted in the bankruptcy of the various companies they own. If their overseas resources are liquidated and the proceeds repatriated and invested in their domestic ventures, the local economy will receive a boost.
We must also send a message to the perpetrators. In the language of the criminal justice system, the goal would be “deterrence, retribution, and recovery.”
The asset recovery phase involves several steps that must be performed carefully. For starters, a special sub-unit composed of legal and financial experts could, without delay and with much fanfare, freeze the funds or other assets of designated individuals or entities. Fortunately, Bangladesh can leverage the goodwill of the interim government and seek assistance from three powerful international agencies: i) the World Bank’s Stolen Asset Recovery Initiative (STAR); ii) The Financial Action Task Force (FATF), based in Paris; and iii) the U.S. Department of Justice’s Money Laundering and Asset Recovery Division (MLARS).
Going forward, the task force should initiate and hire personnel to take and strengthen legal action in the following areas: identifying stolen assets, including non-performing bank loans; gathering intelligence and evidence and locating foreign assets; determining the beneficiaries of ML and ownership transparency; initiating international cooperation between involved jurisdictions; coordination among agencies participating in the task force; and legal actions, national and international.
Why is international cooperation so important? Most of the stolen money is invested abroad or stashed away in foreign banks. The process of identifying and recovering these investments will be slow and involve going after the lawyers, trust experts, real estate agents, accountants and financial institutions representing the individuals – the Saifuzzamans and the Benazirs – who may already be have been identified and tipped in advance. . The money, once taken out of the country, was most likely invested in real estate or businesses through a process known as ‘layering’, where ownership is completely vague. We need to hire the best global investigators to trace the money as the beneficial owner may be hidden behind layers of shell companies or a nominated corporate director.
Because the US, Canada, Singapore and the UK have some of the strictest anti-money laundering (AML) legislation and enforcement mechanisms, our embassies or high commissions in these countries must be notified of the business entities or persons of interest . Several newspaper accounts of Bangladeshi residents in Singapore, New York, Toronto and London have surfaced in recent years. The task force can forward the list of suspects to MLARS and target the three most corrupt sectors identified in the White Paper: the financial sector, the ICT sector and the power sector.
The ultimate goal of the current administration is to lay the foundation for an anti-ML program that will prevent future events. A comprehensive ML program includes investments in employee training, stricter internal controls, accountability and early detection.
We must build stronger defenses against corruption, money laundering and fraudulent business practices. Key sectors like banking should have guardrails against the ‘bad influence of party politics’, to quote Dr Wahiduddin Mahmud. Various policies and actions recommended by the Farashuddin Commission, initiated after the Bangladesh bank robbery, need to be implemented. A whistleblower program should be established to reward those who provide useful information about illegal financial activities.
Finally, this latest story on money laundering and kleptocracy underlines the urgent need for relentless commitment and proactive implementation of a comprehensive AML compliance framework in Bangladesh to protect the financial system.
Dr. Abdullah Shibli is an economist who works for Change Healthcare, Inc., an information technology company. He also serves as a senior research fellow at the US-based International Sustainable Development Institute (ISDI).
The opinions expressed in this article are those of the author.
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