The Customs department has found several loopholes that exporters are utilising to take advantage of the cash incentives the government offers for exports. Such malpractices are being used to first, launder funds by way of trade-based money transfer. Second, by making declaration of fictitious exports, a section of exporters is bleeding the national exchequer instead of boosting outbound trade, as envisioned. The over and under-invoicing of exports have long held sway in our country as a favourite means of money laundering and now with misdeclaration added to the brew, the country is losing out on a lot of cash.
The financial crunch is playing havoc with revenue collection and it is good that customs intelligence is stepping up its game to try and put a stop to these long-ignored malpractices. The authorities have been forced into action amid an economic downturn and it makes sense to put in place the right mechanisms to check the practices that are aiding money laundering of funds out of the country. To quote a report published in this newspaper, "Under-and over-invoicing, concealment of customs declaration, forgery of export documents, showing fake export, irregularities in export of products by the industries enjoying duty-free benefit under bonded-warehouse schemes have been spotted as major ways of money laundering through trade".
Although it is not known precisely how much money the government is losing out in terms of fake cash incentives, the national board of revenue (NBR) is gearing up to employ methods whereby its customs intelligence wing will be taking a closer look into this whole issue. It is absolutely crucial that the authorities find a more foolproof system that will drastically cut down on the methods currently employed for issuance of export approval. Mandatory inspection of goods and their volume by companies must be done in a manner that will not delay shipment and yet, make it more difficult to skirt around the system.
Field offices of the customs department need to be brought up to speed. However, it is obvious that such malpractices were not developed in a day and there will be pushback from those members who are obviously benefitting from these illicit practices. Again, singling out the Customs wing of the NBR is obviously not going to work. This requires coordination amongst the NBR, the various ministries including Finance and Commerce, the central bank, the Export Promotion Bureau, and the Bangladesh Trade and Tariff Commission(BTTC), to work together in finding best practices in foreign lands; and to tailor-make solutions that will work in our local environment.
Cash incentive given against merchandise export costs the national exchequer a substantial amount of money as the rates of the same vary between 1.0 and 20 per cent. Country exports goods worth US$45+billion annually. It can thus ill-afford any misappropriation to take place here. Indeed, the Customs Intelligence wing has made public the names of companies that have been caught increasing the weight of goods (including T-shirts, tops, ladies' dresses, etc.) to avail of more incentives. Other items that have been put through the same treatment include diversified jute export products, aluminum ingots, etc. Indeed, there are instances of exporting companies that have received cash incentives but cannot show any of their goods having entered the port for export purposes!
What is amply clear is that for every case that comes to light, many others slip through the existing rules. Some recommendations have been made that divide up exporting companies as per category, in terms of "value of raw materials, wages, expenditures in factory, relevant production cost." The fresh initiative would require a regime of crosschecking across banks, export-permit issuers, and all other relevant stakeholders in the export process. Finally, laws need to be revisited about penalties and jail terms that make money laundering too expensive and dangerous an activity to indulge in by businesses.
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