As the ranks of the country’s millionaires continue to mushroom, many of them in their increasing numbers are sending money overseas at unprecedented levels either to pull their ill-gotten gains out of the country or to seek safer investments abroad. As a result, the flood of cash from Bangladesh is being felt around the world, from the vault of Swiss banks to the second home project in Malaysia. A tougher Money Laundering Prevention (Amendment) Act was introduced in 2015 to staunch capital outflow but since then the situation has been getting worse, not better. Individuals and companies kept laundering money in direct violation of the law.
Financial analysts say if Bangladesh is to achieve sustained high economic growth and become a middle-income country by 2021, it cannot afford inaction on capital flight. According to the latest report of Global Financial Integrity (GFI), Bangladesh has lost as much as USD75.85 billion in last one decade (2005-2014). The country could have financed two national budgets with this staggering amount of money. Although last two years’ estimates are not yet in, USD6 billion to USD9 billion may have left in 2014 alone. To put it simply, illicit financial outflow is bleeding the country dry, and if nothing is done, the bleeding will only get worse. There is a growing call for taking steps to bring back the money laundered from Bangladesh and to punish the money launderers. Observers think that if the widespread practice of making money illegally cannot be stopped and an investment-friendly environment cannot be ensured, then the trend of moving money out will continue to gain momentum. In a time when countries across the world are increasingly taking tougher stance against money laundering and terror financing, Bangladesh seems nonchalant about such a serious matter. As money laundering from the country has been growing year by year, investment remained weak and foreign reserve dipped; both of which are negatively affecting employment generation and economic growth. If this situation persists, our journey towards becoming a developed nation will definitely be delayed.
GFI unveiled the report titled “Illicit Financial Flows (IFFs) to and from Developing Countries: 2005- 2014” recently. The report mentioned that illicit financial outflows from Bangladesh ranged between 12 percent and 17 percent of the country’s annual trade. It also put Bangladesh’s total trade value for 2005-2014 at USD446.153 billion. If the 17 percent of trade value turned into illicit financial outflows, the amount stood at USD75.84 billion in last 10 years. If it is 12 percent or minimum, even then the annual outflow reached USD5.35 billion. According to the Washington based research and advocacy group, trade misinvoicing – in which business entities over-invoice in export and under-invoice in import – accounts for roughly 70 percent of illicit financial outflows. Commenting on the GFI report, law minister Anisul Huq said, “We have a strict Anti-Money laundering Act. If the report is found true, the perpetrators will be tried under that act.” Meanwhile, state minister for finance MA Mannan told parliament that Bangladesh Bank would investigate the allegations of money laundering.
A portion of the capital stashed away from Bangladesh is being deposited in different Swiss banks. Last year’s disclosure by the Swiss National Bank showed that deposits by Bangladeshi citizens at various Swiss banks rose to 8.85 percent year-on-year in 2015 to an astounding 550.85 million Swiss francs, which is around BDT49 billion. Moreover, according to a study by the United Nations Development Program, over the last four decades, the country lost over USD3 trillion in capital flight. It means the country on average lost USD800 million a year, which accounts for 30.4 percent of its GDP.
On top of that, many emerging countries are luring away capital from developing countries like Bangladesh under ‘My Second Home’ or similar other resettlement schemes. Case in point, Malaysia under its My Second Home (MM2H) program grant residency to anyone who can show liquid assets worth at least about BDT12.2 million and offshore income of about BDT245,000 per month. And well-todo Bangladeshis are making a beeline in response to the offer. Quoting the country’s cultural minister, a Malaysian newspaper, The Star, recently reported that until November last year as many as 31,723 applications from 126 countries were approved under the program. China forms the biggest number consisting of 7,976 approved applications followed by Japan (4,127) and Bangladesh (3,399) among other countries. It is estimated that Bangladeshis, mostly politicians, businessmen, and bureaucrats, so far invested more than BDT40 billion to settle down in Malaysia. Sources in the Anti-Corruption Commission (ACC) said that the organization had information about 15 wealthy individuals who signed up for second home project in Malaysia by laundering money from Bangladesh. Of them, seven are politicians and eight are businessmen.
The law requires individuals and local firms to take approval from Bangladesh Bank to invest in foreign countries. So far only six local firms have been granted permission to invest in their international ventures. These companies are primarily running their operations in USA, UK, and a number of countries in Africa. Aside from these six companies, all other groups and individuals who are sending money abroad are doing so illegally. Singapore has long been a hot destination for siphoning money out of the country. Many Bangladeshis, including a number of politicians, set up business ventures in Singapore such as sweetshops, restaurants, petrol pumps, and so forth. Large garment industries have also been set up in Kenya by laundering money from Bangladesh. Many are also doing hotel business in Thailand, Singapore, UK, and other countries. British investigative agency Scotland Yard found that some leading politicians from Bangladesh have deposited huge amounts of cash in various banks in the UK. Former finance adviser to a past caretaker government AB Mirza Azizul Islam said, “Private sector accounts for 75-80 percent investment in the country. But now private investment is on the wane. At the same time, import costs have been increasing over the last two years. It is believed that importers are laundering money off in the guise of financing import.”
He said, “Relevant agencies of the government must investigate the matter. Prevention is better than cure. Once money is taken abroad, it is very difficult to bring it back. The channels of money laundering should be brought under strict surveillance.” On the other hand, former governor of Bangladesh Bank Salehuddin Ahmed said, “Those who earn money illegally and do not feel secure to keep it in the country are prime money launderers. In order to stop capital flight, first we need to stop illegal means of making a quick buck. Then we have to create an investment-friendly atmosphere so that the rich feel encouraged to invest in the country instead of draining their money out of the country.”