‘Finding Those Who Launder Money isn't a Difficult Task’

Muinul Islam | 13 June 2021
No image

Previously, sending money overseas used to take place under-invoicing of exports and invoicing of imports. But now the hundi method has gained more popularity

Every year, a large chunk of 'illegal money' or 'black money is being sent to Begum Para of Canada, Malaysia, USA, Australia, to buy real estate/business with the aim of settling down there in the future and never coming back to the country to avoid paying bank loans.

This failure to repay has become a huge problem for us. It is the problem of capital flight. This has originated from the fact that our 13 million emigrants don't send all of their remittances through legal channels.

Previously, sending money overseas used to take place through under-invoicing of exports and over-invoicing of imports. But now the hundi method has gained more popularity. Different countries allow immigration to the entire family if a certain amount of money is transferred. This is prevalent in the US, Canada, Australia, and different parts of Europe.

The corrupted individuals from our country are taking undue advantage of this rule quite regularly. For instance, a lot of the garment owners don't bring a significant portion of the money they earn from exports to our country. They keep it overseas, buy homes and businesses with that, and migrate there with their family. Again, the importers are over-invoicing their imports, taking loans from banks using that, and are doing the same. This is the problem of capital flight.

Our decision of giving people the opportunity to make their black money white by imposing 10% tax is facilitating the process of money laundering as it allows people to legalise the money they have earned through illegal methods. This will encourage them more to engage in corruption and launder money.

This also raises an important question- what wrong the honest taxpayers who are having to pay 20%/25% tax have done for which they are paying higher tax? This is also unconstitutional in accordance with Article 20 (2) of the Constitution of the People's Republic of Bangladesh, "The State shall endeavour to create conditions in which, as a general principle, persons shall not be able to enjoy unearned incomes, and in which human labour in every form, intellectual and physical, shall become a fuller expression of creative endeavour and of the human personality."

Another popular way to launder money is through Hundi. Bangladeshis living overseas send remittances to their relatives and friends through Hundi. It works as a credit transfer or IOU (I owe you—a document that acknowledges the existence of a debt), and transfers money without actually moving it from one region to another.

So, what has happened is that the remittance that was supposed to come is not coming in foreign currency and the relatives of emigrants are getting this money in local currency, whereas the amount in foreign currency is being laundered abroad. Global Financial Integrity (GFI) is saying that every year, $6-10 Billion is being laundered in this way from Bangladesh, and we have turned into a major player in terms of money laundering.

So, even this year, the $24-25 billion remittance we will receive, a big portion of it will come to Bangladesh through Hundi, just as an attempt by corrupt people to turn their black money into legitimate money.

Capital flight, in particular, is very harmful for us because this money will never come back to our country, and banks will never have a chance of getting the money taken as loans back.

But with money laundering, there is a chance that the money will come back to our country, and it will contribute to our economy. This will be used in investment, plus the family that will be benefited by the remittance money, they will be to improve their overall standard of living. So, it cannot be said that this is entirely bad. But if it is done through taking loans from banks, and not repaying them, then, these banks will be in deep water because of the overwhelming amount of loan defaulters.

Finding those who launder money isn't a difficult task. The government can send research teams to countries where the money is mainly laundered to collect information. Collecting this information isn't difficult but the government is hesitant because mainly those who are affiliated with the government are involved in money laundering.

It is very clear that the people who are engaged in corruption are mainly those who have close ties with our government. So, it is unreasonable to expect that the current government will take steps to collect this information.

Although we are a signatory of the United Nations Convention against Corruption, it is not accidental that we have become the world champion in corruption five times. We are still not in a good position. We still hold the unwanted number one position in corruption in South Asia. Prevalence of corruption here is much more intense in our country than Nepal, India, Pakistan. 

Dr Muinul Islam, Economist. 

This article was originally published on The Business Standard.
Views in this article are author’s own and do not necessarily reflect CGS policy.