Published:  01:43 AM, 20 June 2022

Money laundering triggers tension in financial sector

Funds deposited by Bangladeshi nationals and entities in all the Swiss banks swelled by 55 per cent to around CHF (Swiss Franc) 871 million (Tk 83.18 billion) in 2021, according to available data. Prominent citizens have warned that Bangladesh may turn out to be another Sri Lanka if money laundering and other financial scams cannot be prevented.

The annual financial statements of 239 banks in Switzerland for the 2021 financial year, released by the Swiss National Bank (SNB) in Zurich a few days ago, unveiled the latest figures, at a time when there have been flurries of discussions over a proposed government amnesty on siphoned-off money for its repatriation.

Although the figure is popularly perceived as money stashed from Bangladesh to Switzerland, the official statistics of SNB didn't mention anything in this connection.

At the average rate of Tk 95.50 per CHF, the figure stands at Tk 83.18 billion by 2021 account, which was Tk 56.38 billion in the previous year.

Due to significant depreciation of the Bangladeshi currency (BDT) in the past year, figures quoted in BDT last year in this newspaper may not match the current figures of the previous years.

The funds parked, officially bank deposits, by Bangladeshi or any other non-Swiss individuals and entities are described by the Swiss central bank as 'liabilities' of Switzerland's banks.

The liabilities are mainly divided into two parts. The major part is "amounts due to bank" under which money linked with Bangladesh increased to CHF 844.47 million or Tk 80.65 billion in 2021 from CHF 530.63 million or Tk 50.67 billion in 2020.

The money under other part or "amounts due in respect of customers' deposits" declined to CHF 26.35 million or Tk 2.51 billion in the last year from CHF 32.23 million or Tk 3.08 billion in the previous year or 2020.

The above-mentioned figures did not include the amount deposited through the fiduciaries or wealth managers.

The Bangladesh-linked money deposited through the fiduciaries declined sharply last year, coming down below CHF 1.0 million.

Generally, a large part of the funds held in Swiss banks is considered either stashed from different countries or 'black money'.

Bangladesh Bank, a few years back, in an explanatory note on Bangladesh-linked money in Swiss banks had said that around 10 per cent of such deposits accounted for individual clients and the rest deposited by banks for trade-related transaction purpose.

The official statistics released by the SNB also do not include the money that any Bangladesh-linked client of the Swiss banks might have deposited and kept in the name of shadow entities or shell companies.

Meanwhile, the total funds held by all foreign clients of the Swiss banks in the past year increased slightly to around CHF 1.48 trillion from CHF 1.44 trillion in 2020. The total funds included total liabilities of Swiss banks plus fiduciaries' liabilities.

In 2021, direct foreign deposits with the Swiss banks reached CHF 1.40 trillion while deposits through the wealth managers stood at CHF 76.77billion.

The SNB statistics further show that Indians' direct deposits with Swiss banks last year jumped by 50 per cent to around CHF 3828.91 million from CHF 2552.63 million in 2020.

Pakistan-linked money in Swiss banks also increased 9.80 per cent to CHF 705.06 million in 2021 from CHF 642.29 million in 2020.

These figures, however, did not include deposits through the wealth managers. This kind of deposits by Indians increased marginally to around CHF 3.0 million and by Pakistanis declined slightly to CHF 6.20 million in the last year.

Though the Swiss banking system generally ensures full confidentiality of the depositors, which turns the country into one of the largest tax havens in the world, the Swiss government has started sharing depositors' information with some other governments.

Finance Minister AHM Mustafa Kamal proposed to retrieve and legalize laundered funds from abroad through a taxation of 7% to 15% in the budget for the 2022-2023 fiscal year. However, economists and civil society members opposed this proposal. Dr. Mustafizur Rahman, Distinguished Fellow of Center for Policy Dialogue (CPD) said that showing amnesty to money launderers will encourage financial perpetrators to launder more money to foreign countries. CPD further said in its reactions over the proposed budget that legalizing laundered funds is neither ethical nor logical.

A senior official of Bangladesh Financial Intelligence Unit (BFIU) said that most of the money laundering from Bangladesh to overseas locations takes place in a trade-based way. Over-invoicing and under-invoicing are often utilized by money launderers while committing illegal money transfer. BFIU chief Masud Biswas has meanwhile affirmed that the money laundering allegations will be properly investigated and necessary actions will be taken too. BFIU should establish sound and solid contact with the Swiss National Bank and strong initiatives should be executed to get required information about the money launderers who have transferred funds to Switzerland.

Allegations show that a group of fraudsters conduct money laundering through an evil nexus. Trade deficit in Bangladesh has reached 27.57 billion dollars during the first ten months of the 2021-2022 fiscal year.

The Asian Age published a report on the front page on 26 February 2017 titled, "Tk 30, 000 crore vanishing trick: 60% of defaulted loans from public banks written off." Taking this report into cognizance, the High Court ordered Bangladesh Bank to furnish full facts and figures related to the persons and amounts with reference to defaulted loans up to 31 December 2016.

Financial sources have informed that defaulted loans have crossed 2 trillion taka including written off debts though official figures show a lesser amount of defaulted loans. Financial analysts have said that most of the money of the defaulted loans might have been laundered abroad.

Former adviser to caretaker government Dr. Wahid Uddin Mahmud said, "These money laundering allegations should be investigated immediately. Finance ministry, National Board of Revenue and Bangladesh Bank can jointly conduct this scrutiny. Illegal money transfer cannot be stopped if stern actions against money launderers are not taken quickly."

Caretaker government's former adviser Dr. Hossain Zillur Rahman said, "The government should try hard to establish an investment-friendly atmosphere in the country to stop capital flight. Local entrepreneurs should be further encouraged to invest money at home."

Dr. Abul Barakat, President of Bangladesh Economics Association, said, "Money laundering allegations should be investigated seriously to establish good governance in banking and financial sectors. Bangladesh Bank should clarify what steps have been taken to restrain money laundering."

Professor Anu Muhammad of Jahangirnagar University said, "Financial vices like money laundering threaten Bangladesh's economic foothold. Financial regulators have failed to take strong actions against money launderers and loan scammers."

Dr. Nazneen Ahmed, Country Economist of UNDP said, "Money laundering and other financial graft and anomalies cannot be resisted without establishing good governance."

Dr. Iftekharuzzaman, Executive Director of Transparency International Bangladesh (TIB) said, "Bangladesh is at present the second most corrupt country in South Asia according to the ranking by Transparency International. Corruption undermines the government's good jobs. Bangladesh government can resort to international money laundering laws for nabbing financial scammers. Besides, Bangladesh Bank, National Board of Revenue and Anti-Corruption Commission can take strong actions against the individuals who are committing such monetary rackets."

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