As technology and laws move forward to stop crimes, criminals are also changing their strategies to divert the attention of the law enforcement agencies. For example, trade based money laundering and terrorist financing is one of the growing criminal activities that have attracted attention of global law enforcement agencies. In such crimes, a transaction is made in the guise of trade in an attempt to legitimise its illegal origins.
The Financial Action Task Force (FATF) has recognised trade based money laundering or terrorist financing as one of the key ways through which criminal organisations and terrorist financiers move money for disguising its origins and integrating it back into the formal economy.
The Global Financial Integrity report predicts that Bangladesh is one of the top countries facing such crimes. According to a survey conducted by the Bangladesh Institute of Bank Management, trade based money laundering and terrorist financing is a major concern for the banking sector of Bangladesh because of the rapid expansion of foreign trade.
According to a report of Transparency International Bangladesh, some $3.1 billion (Tk. 26,400) crore is being illegally remitted from Bangladesh every year, depriving the government exchequer of about TK 12,000 crore in revenue each year.
Bangladesh is fully committed to remain at the forefront of all global efforts to combat such risks. The country has become a party to the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988), known as Vienna Convention, which deals primarily with provisions to fight the illicit drug trade and related law enforcement issues.
The country is also a party to the International Convention against Transnational Organized Crime (2000), known as the Palermo Convention, which specifically obligates each ratifying country to criminalise money laundering and includes all serious crimes as predicate offences of money laundering.
Bangladesh being a member country of the Asia Pacific Group on Money Laundering is committed to the effective implementation and enforcement of internationally accepted Forty Recommendations of the FATF on ML/TF.
Bangladesh has also got the membership of the Egmont Group which helps get global support in fighting against financial crimes.
In line with the international standards and initiatives, Bangladesh passed the Money Laundering Prevention Act (MLPA), 2002 and Rules, 2019, Anti-terrorism Act, 2009 and Rules, 2013.
According to section 2(v)(ii) of MLPA, smuggling of money or property is considered as money laundering and the Act provides stringent punishment for the offence. In accordance with section 4 of the MLPA, any person who commits or abets or conspires to commit the offence of money laundering shall be liable to be punished for a minimum of four years and maximum twelve years of imprisonment, in addition to that a fine equivalent to twice the value of the property involved in the offence or BDT 10 lakh, whichever is higher, shall be imposed.
The punishment for an entity in this regard is a fine of not less than twice the value of the property or BDT 20 lakh, whichever is higher and the license of the entity is also liable to be cancelled. It is, therefore, clear that smuggling of money or property is strictly prohibited in the laws of the land.
In 2019, Bangladesh Financial Intelligence Unit (BFIU) issued guidelines, namely "Guidelines for Prevention of Trade Based Money Laundering" for banks, to prevent money laundering in the name of export and import.
Furthermore, Guidelines for Foreign Exchange Transactions (GFET), 2018 and Import Policy Order have made specific mandatory requirements for ensuring pricing competitiveness prior to any international trade transactions.
Besides, there are a considerable number of Acts, regulations and various instructions that regulate trade services in Bangladesh. The Foreign Exchange Regulation Act, 1947 lays the foundation of the regulatory framework by which Bangladeshi trade is mostly governed.
The Import and Export Control Act, 1950 controls the import and export of goods to and from Bangladesh, while the Customs Act, 1969 defines the operational customs procedures of import and export in Bangladesh.
The Bangladesh Bank Order, 1972 empowers Bangladesh Bank to formulate and implement policies in the foreign exchange market and to hold and manage the official foreign reserves of Bangladesh.
In accordance with The Importers, Exporters and Indentors (Registration) Order, 1981, the Chief Controller of Import and Export (CCI&E) is empowered to issue Import Registration Certificate (IRC), Export Registration Certificate (ERC), Import Permit (IP) and Export Permit (EP) to importer and exporter of Bangladesh to perform trade.
Despite having such a legal framework and mechanism to conduct trade worldwide in place, Bangladesh has ranked 54th out of 133 nations in the recently published Financial Secrecy Index (FSI), 2020, with a score of 72.73.
The score indicates there is lack of implementation of the laws and lack of proper monitoring and supervision over TBML activities that ultimately allows criminals to hide and launder money.
Absence of coordination is one of the major challenges in combating TBML. "Mis-declaration of pricing of the imported and exported products is a great concern for TBML. There is a minimum price limit for products but no maximum limit. As a result, fraudsters can easily launder money," said Moinul Khan, commissioner of Customs Valuation and Internal Audit Commissionerate.
In Bangladesh there is a shortage of skilled manpower who are able to understand and handle the foreign exchange dealings very well.
International trade is denominated in terms of internationally acceptable currencies. The conversion of currency at market determined exchange rates enhance the scope for criminals to launder the proceeds of or instruments of crime.
Of all the channels through which money laundering takes place, the most difficult to detect is TBML. The menace of TBML is an increasing, yet often under-reported, financial and reputational risk to banks and a growing concern to governments and regulators.
To combat TBML/TF, enforcement of all trade related laws and regulations needs to be ensured and every criminal irrespective of their political affiliations should be brought under process of law and maximum punishment should be executed.
Building better awareness among the agencies responsible for detection, investigation and prosecution of offenders involved in TBML is required.
Practical obstacles in the area of domestic cooperation and information sharing to combat TBML/FT need to be identified and addressed. Otherwise the growth and sustainable development of the country will stagnate and the dream of transforming into a developed economy by 2041 will flounder.
As the trade process involves multiple parties, combating this crime requires unified measures by all concerned agencies. To ensure coordination among regulatory authorities, a One Stop Service Point, in combination with all stakeholders dealing with international trade related issues, may be established.
The success of financial crime compliance initiatives should consider the effectiveness of outcomes, not just adherence to a process. New technological inventions like—blockchain and Artificial intelligence have the potential to monitor complex, multi-party transactions and to ensure more transparency in cross border transactions.
If such promising technologies are implemented across jurisdictions and stakeholders can formulate agreements for better information sharing and improve harmonization of cross-border data, there is a strong possibility in reducing the menace of TBML dramatically.
The writer is a corporate legal practitioner and can be reached at: firstname.lastname@example.org