Financial Crime World

Preventing Financial Crimes in Banking: A Challenge for Bangladesh

Introduction

Bangladesh has been identified as a major source of illicit financial flows, with billions of dollars being laundered out of the country each year. This article explores the challenges of preventing financial crimes in banking and the steps needed to be taken by the government to combat money laundering.

The Scope of the Problem

  • Illicit Financial Flows: According to a Global Financial Integrity report, $61.6 billion was smuggled out of Bangladesh from 2005 to 2014, with trade misinvoicing being the most common method.
  • Money Deposits in Swiss Banks: The Central Bank of Switzerland calculated that the amount of money deposited by Bangladeshis in the country’s banks in 2016 increased by about 20 percent from the previous year.

Government Response

  • Lack of Information: The current finance minister has expressed his inability to glean information about laundering, and the government’s political will to prevent money laundering is constantly being questioned.
  • Existing Laws and Conventions: Despite having laws and conventions in place to combat money laundering, such as the Money Laundering Prevention Act and international agreements like UNCAC, Bangladesh has not effectively used these tools to recover laundered money.

The Recovery Process

Recovering laundered money involves a complex process that requires cooperation between countries, law enforcement agencies, financial institutions, and international organisations. The standard international process for returning laundered money is through mutual legal assistance (MLA), which includes:

  • Gathering Evidence: Assistance with gathering evidence to build a case against individuals or organisations involved in money laundering.
  • Interviewing Witnesses: Support with interviewing witnesses who can provide information about the source of the laundered funds.
  • Freezing or Seizing Assets: Cooperation with financial institutions and law enforcement agencies to freeze or seize assets linked to money laundering activities.

Challenges in Bangladesh

  • Missing Countries from MLATs: Despite signing mutual legal assistance treaties (MLATs) with several countries, there are still some popular money laundering destinations that remain missing from this list.
  • Lack of Robust AML Measures: Bangladeshi banks and financial institutions lack robust anti-money laundering (AML) and know-your-customer (KYC) procedures in place.

Recommendations

To initiate recovery efforts, Bangladesh needs to:

  1. Strengthen Legal Framework: Implement effective laws and regulations to combat money laundering.
  2. Implement AML Measures: Establish robust anti-money laundering (AML) and know-your-customer (KYC) procedures in financial institutions.
  3. Establish Independent Institution: Set up an independent institution to oversee lawsuits related to asset forfeiture.

Conclusion

Preventing financial crimes in banking requires a strong political will to combat money laundering and facilitate the return of stolen assets. Bangladesh needs to take bold action to address this complex issue and ensure that its financial system is transparent and accountable.