In its latest financial report Washington-based Global Financial Integrity (GFI) unveiled the amount of illicit financial flows (IFFs) going to and from the developing countries, with estimates based on the International Monetary Fund's (IMF) Direction of Trade Statistics dataset.
The report revealed that at least US$ 5.90 billion flew out of Bangladesh illicitly in 2015 through trade misinvoicing with the advanced economies. The amount is closer to around two months' merchandise export of the country. It also showed that illicit financial inflows from other countries to Bangladesh stood at $2.8 billion in 2015. This is an alarming situation for Bangladesh.
GFI also explained how trade misinvoicing occurs. Trade misinvoicing is accomplished by misstating the value or volume of an export or import consignment on a customs invoice. The report explained that trade misinvoicing is a form of trade-based money laundering, made possible by the fact that trading partners write their own trade documents, or arrange to have the documents prepared in a third country (typically a tax haven), a method known as re-invoicing.
IFFs can be generated in a variety of ways that are not revealed in national accounts or balance of payments figures. These can include trade mispricing, bulk cash movements, hawala transactions, and smuggling.
IFFs pose a huge challenge and threat to political and economic security around the world, particularly to developing countries.
They facilitate transnational organised crime, foster corruption, undermine governance, and decrease tax revenues.
Domestic resource mobilisation and IFFs are closely linked, as tax evasion - the practice of illegally hiding income from tax authorities and sending it abroad -- hampers government efforts to mobilise domestic resources.
GFI believes that the most effective way to limit IFFs is to increase financial transparency, i.e. 1) detect and deter cross-border tax evasion; 2) eliminate anonymous shell companies; 3) strengthen anti-money laundering laws and practices; 4) work to curtail trade misinvoicing; and 5) improve transparency of multinational corporations.
The government should look into the findings of the report and consider integrating the recommendations in their plans to curb IFFs.
Md. Zillur Rahaman
Islami Bank Bangladesh Ltd.
Lalmohan Branch, Bhola.
[email protected]
