Money laundering results in flight of funds from the country which could otherwise have become part of the much needed capital driving the economy. It is very much rampant here as revealed by leaked financial documents like the Panama Papers.
Being a progressive economy, it is really hard to believe how a huge amount of money is being driven out of Bangladesh in the process of laundering. It is true many people seek to keep the money they earn in a secure environment. Since stability persists here now, why should they send money abroad?
A report prepared by the Global Financial Integrity (GFI) ranked Bangladesh second in South Asia in terms of illicit outflows of money. It said a staggering amount of $5.9 billion was siphoned out of Bangladesh in a just a single year through trade mis-invoicing.
The new GFT study estimated that Bangladesh had lost between $6.0 billion and $9.0 billion to illicit money outflow on an average every year. The country lost, according to the latest report, the second highest amount of illicit fund flows (IFFs) after India among the South Asian nations. The illegal outflow through trade mis-invoicing in other South Asian countries, including Pakistan and Sri Lanka, was less than a billion dollar.
High level of mis-invoicing, as a percentage of total trade, indicates that most governments in the developing countries do not benefit from a significant portion of their international trade transactions with advanced economies. Bangladesh tops the list of lesser developed countries for illicit financial outflow and ranks at 40 among the top 100 countries in this regard. This is enough to understand the gravity of capital flight from the country.
The amount of finance transferred unlawfully from the country over the past 10 years, exceeds the current fiscal year's budget by over a trillion taka. Capital of flight is a global problem but the situation in Bangladesh is something alarming. It has been observed that lack of an investment environment promotes the illegal outflow of finance.
At a recent discussion, economists, bankers and businesspersons said there is no alternative but to take immediate and effective measures to remedy the situation. The relevant institutions should be strengthened to curb capital flight and a task force may be formed to ensure proper coordination.
The deposits of Bangladeshis in various Swiss banks dropped recently as the central bank is reportedly keeping a close watch on money laundering. The central bank has taken cautious measures in the new monetary policy, keeping in mind the issue of money laundering. In recent times, it has found some gross violations in foreign exchange transactions that have raised concern about money laundering.
Bangladesh's per capita debt is $378 and the debt burden would have been less if it could curb illegal capital flight. Many Bangladeshis have accounts in Swiss banks; names of some of some of them was mentioned in the leaked Panama papers. It is unacceptable that the country is unable to prevent illicit capital flow out of the country.
Cooperation with the relevant countries should be stepped up to prevent such transfer of money. According to GFI, 85 of 90 per cent of this illegal wealth transfer is done in the guise of international trade. This sector needs to be closely monitored. However, political will appears to be the most important tool to prevent such illegal capital flight.
It is shocking that such a huge illegal outflow of capital is happening at a time when the country is suffering from a lack of adequate investment. It also shows the businesses' lack of confidence in investing in the country. This has to be reversed at any cost.
A healthy business environment in the country can attract more foreign direct investment (FDI), encourage more entrepreneurs to invest in the country, decrease flight of capital by local and multinational enterprises and generally sustain a sound economic environment in the country.
