Following a curious transaction made using an international credit card, Bangladesh Bank has decided to tighten regulations on online payments.
An international credit card holder of a local private bank has been found investing in the Australian stock market from Bangladesh, where he purchased shares worth around $200.
He did not face any hassle until he sought permission to cash out the $175 profit he had made from the shares.
Following the request, the private bank brought the matter to the attention of Bangladesh Bank, seeking permission for encashment, which raised concerns about the ease with which a person can use international cards for gambling or for other illegal purposes.
Since there is no clear mention about the legitimacy of such transactions, the central bank did not take any punitive action against the local bank.
However, it has warned all banks to only allow online payments through international cards for legitimate purchases of items and goods specified by the central bank, said a senior Bangladesh Bank executive.
In a circular issued on Thursday, the central bank introduced the Online Transaction Authorisation Form (OTAF) for online payments to prevent misusing international cards on illegitimate transactions, including online gambling, forex trading, purchasing financial instruments issued in foreign stock markets, and purchasing cryptocurrency and lottery tickets.
From now on, customers will have to submit the OTAF using a mobile application, online or in hardcopy – stating the payment details – to the respective banks.
The banks will then activate the respective card upon being satisfied about the legitimacy of the transaction declared on the OTAF. After execution of the transaction, the international payment option will be deactivated immediately.
The banks will verify the executed online transactions with the declaration in the OTAF and satisfy themselves regarding payment of applicable VAT, tax and duty for online purchase of goods and services from abroad using international cards.
This procedure will also be applicable for execution of other permissible international online transactions through international cards from Bangladesh, according to the circular.
"Card issuing banks are advised to observe extended due diligence so as to avoid misuses like illegitimate transactions, without limiting to capital account transactions, prohibited payments such as for playing online casino, gambling, forex trading, purchase of financial instruments issued in foreign stock markets, purchase of cryptocurrency and lottery tickets, etc. of the general authorisation for online payment," the circular said.
Banks were warned of suspension of authorisation of issuing international cards if they failed to comply with the instructions.
According to a guideline of Foreign Exchange Transactions 2018, international cards are, in general, intended for use by cardholders while they are travelling abroad.
However, some specific payments like downloadable application software, e-books, magazine, newspaper subscription fees from reputed and reliable sources abroad are permissible through using an international card.
The amount of online payment, however, cannot exceed $300 or its equivalent in other currencies for a single transaction against legitimate purchase of goods or services, according to the guideline.
Following a recent crackdown on casinos in Dhaka, the government is now trying to bar gambling transactions abroad.
The Anti-Corruption Commission recently sent a letter to Singapore's Corrupt Practices Investigation Bureau to get information on Bangladeshi people who played in casinos there.