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Pandemic pushes risks of financial crimes, experts suggest remedial measures

  • BSS
Image: Collected

Economic turndown, triggered by the ongoing COVID-19 pandemic, has leveraged a hole through which money launderers and fraudsters seek to amass huge cash resorting to financial crime, illicit trade and money laundering.

While the government and financial institutions are trying to follow anti-money laundering measures several money launderers and illegal trade operators have flagged an increased rickety activity, exploiting the COVID-19 situation, to bag benefits, financial security experts viewed.

In many cases criminals and terrorists are presumably attempting to reign in by posing as genuine businesses seeking operators, an ominous symptom that signal the ongoing pandemic might lead to an increase in financial crime, illicit trade and money laundering.

In view of the whole situation, financial security experts suggested making collective efforts by all including the law-enforcement agencies to combat money laundering and illicit trade in order to generate national revenue and accelerate the country’s development activities.

Criminals if escaped after making huge benefits through illegal fund transactions and trades taking advantage of the current situation might mislead other people and businesses in trouble committing crimes to compensate their financial losses, they opined.

They cited, regulatory bodies must consider whether their current internal control and compliance framework can identify COVID-19 related fraudulence and illegal activities. Firms must be able to satisfy the regulators by ensuring updated risk procedure and internal control mechanisms to reduce risks of any possible financial crime, they added.

“Trade-based money laundering is mostly committed in Bangladesh. The government is firmly committed to tackling this serious issue to save its economy,” said Abu Hena Mohd Razee Hassan, Head of the Bangladesh Financial Intelligence Unit (BFIU) of the Bangladesh Bank.

“At the beginning of the pandemic, we instructed banks and other financial institutions to take strict measures so that none can take advantage of the new circumstance,” he added.

Referring to a recent study, he informed, around 80 percent of illegal capital flight globally takes place through illicit trade, which is around 60 percent in Bangladesh.

International trade system is facing serious disruptions due to money laundering and terrorist financing purposes, he mentioned.

“Developing nations are mostly vulnerable to such risks as it has become a major threat to their growth and sustainable development. Taking these into consideration, Bangladesh is fully committed to remain at the forefront of global efforts to fight Trade Based Money Laundering and Terrorist Financing (TBML/TF) risks,” he added.

In this backdrop, considering the fact that international trade transactions are mainly held through banking system of the country, BFIU has issued guidelines for banks suggesting them to establish appropriate measures and techniques to combat TBML/TF, he said.

Earlier, at the beginning of 2020, Director General of the Customs Intelligence and Investigation Directorate (CIID) Muhammad Mubinul Kabir told the media that global trade was disrupted by the emergence of Coronavirus (COVID-19), a pandemic that has devastated normal life in all parts of the world.

The government of Bangladesh has responded to the pandemic with a comprehensive set of measures, including travel restrictions, social distancing measures, strict hygiene protocols and direct interventions in national economies, he added.

When global supply chain was severely disrupted and economic activities halted for travel and transportation restrictions to check transmission of Coronavirus, some organised transnational crime networks took advantage of ineffective regulatory frameworks and supply shortages. They bagged huge financial benefits making big price gaps by expanding their illicit footprints.

To protect illegal activities, the director general said, the government instructed all concerned to remain more aware and check illicit trade with strict hands.

He informed that so far a total of 82 cases, involving around Taka 3,200 crore, have already been filled on trade-based money laundering.

Senior Research Fellow at the Centre for Policy Dialogue (CPD) Towfiqul Islam Khan said the government has adopted a new strategy titled ‘National Strategy for Preventing Money Laundering and Combating Financing of Terrorism 2019-2021’ to combat trade-based money laundering and illicit financial outflow from the country by incorporating few stringent provisions into it.

He urged the authorities concerned to implement the strategy effectively and check illicit trade to help the country achieve development goals.

The budget for fiscal 2020-21 has imposed 50 per cent penalty on mis-declaration of exports, imports and investment in foreign countries. This seems to be a sound proposal from the revenue point of view.

Global Financial Integrity report has ranked Bangladesh as one of the top countries facing trade-based money laundering (TBML), which is a significant threat to growth and sustainable development.

The World Economic Forum estimates that over US$2.2 trillion (S$3 trillion), or 3 per cent of the global GDP, will be lost to illicit trade in 2020.

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