Money laundering unabated on political clout, says TIB

$ 75b in illicit outflows in 2005-2014 which is 1.5 times the nat'l budget for FY 2017-18, it says

FE Report | Published: September 17, 2017 23:37:03

The menace of money laundering has continued unabated in the country mainly due to political influence, Transparency International Bangladesh (TIB) said Sunday.
It listed factors responsible for money laundering included politicisation in regulatory agencies, politico-administrative nexus in indulgence of corruption, presence of politically exposed persons and their family members in different financial institutions and securities sector.
The Bangladesh chapter of the global anti-corruption watchdog said that capacity constraints and absence of dedicated prosecution units were also the limitations of some regulatory agencies to investigate into the money laundering offences.
It said that the illicit money outflows during a period from 2005 to 2014 increased by 120 per cent while the inflows also grew by 120 per cent.
"The estimate of illicit financial outflows during 2005 -2014 was staggering US$75 billion, which is almost equal to 1.5 times the (country's) national budget for FY 2017-18," according to the report.
The revelations came in a TIB study report titled 'Sustainable Development Goal 16: Preparedness, Progress and Challenges of Bangladesh, A Study of Selected Targets', which was released at the TIB office in the city.
"Despite different initiatives, the government's planning lacks adequate emphasis on SDG 16 as there are significant gaps in baseline data. Therefore, a lot of efforts need to be channeled for achieving this goal," TIB executive director Iftekharuzzaman said. TIB chairman Sultana Kamal also spoke at the programme.
The TIB conducted the study between April and August this year on different state machineries, including judiciary, local government, public administration and law enforcement.
The report observed that although considerable amount of illegal financial flows from Bangladesh has been continuing over the years, recovery of the stolen assets has been quite small. The country recovered approximately $ 3.04 million in 2012-13 in Arafat Rahman Koko case in Singapore.
"There has been no success in recovery or inflow of stolen assets after the Koko case although the BFIU has traced a number of illicit financial flow cases and reported to LEAs. Thus, recovery of stolen assets has virtually been in a stalemate."
According to the report, Bangladesh Financial Intelligence Unit (BFIU) has been receiving a good range of Suspicious Transaction Reports (STRs) from an increasingly wide range of reporting organisations and accordingly disseminated to law enforcing agencies (LEAs).
There had been marked increase of STRs in 2014 and 2015 compared to previous years. Most of the STRs came from commercial banks (1,087 out of 1,266 in 2015).
Designated Non-Financial Business or Professions (DNFBPs) did not file any STRs. Very low levels of STRs were shared by state-owned commercial banks (28 out of 1,266 in 2015).
To combat the illicit financing, TIB suggested the government to set up exclusive legal framework, including dedicated money laundering investigation and prosecution units for law enforcing agencies.
TIB also recommended development of a case management system for money laundering at the attorney general's office.
It recommended empowering the customs authority to identify the over-invoicing, under-invoicing, over-shipment, under-shipment or phantom shipment to curb illicit flow of funds.
The other recommendations included appropriate legal framework for asset recovery, amendment to the Companies Act 1994 and Trust Act 1882 to include beneficiary ownership information for registration of legal persons and trusts, and automatic exchange of financial account information with other countries must be established.
Mr Iftekharuzzaman said that despite having a robust legal and institutional framework for reducing corruption, the menace is rampant in the country.
He said the institutional capacity to address corruption remained questionable due to low number of enquiry and investigation compared to complaints, poor case disposal and poor rate of convictions, which reflects lack of adequate investigation and prosecution skills.
There is also allegation of impunity on the part of corrupt political leaders that might have provided incentive for the expansion of corruption at different levels.
"The government is protecting influential people involved in big scams … we have seen such examples during Sonali Bank and Basic Bank loan scams," said the TIB chief executive.
The report said the state-owned commercial banks (SoCBs) have experienced a number of large scale fraudulent loan scams such as BASIC Bank, Sonali Bank etc during the recent years.
It was alleged in the report that political appointments in the boards and managements of these banks were largely responsible for these scams. Moreover, the level of automation and record keeping in these banks compared to private ones were found to be much less, said the report.
However, the national risk assessments (NRAs) did not comprehensively cover these risks posed by the SoCBs, the report said.
According to the report, inside trading and market manipulation in the securities sector were quite rife in Bangladesh. Most of the securities licenses were awarded to politically-connected persons. However, this risk was not covered in the NRA.
The report said the SoCBs were not subject to proper independent prudential regulation by Bangladesh Bank (BB), with the Finance Ministry functioning as their owner.
The challenge is that the central bank is not wholly independent of the Finance Ministry, creating limitations on supervisory powers and full implementation of core principles in that sector, including anti-money laundering controls on market entry fit and proper and risk management, according to the report.
"Moreover, the Finance Minister is the convener of the NCC to whom the BFIU is reportable. So, it is going to be very difficult for the BIFU to make state-owned commercial banks accountable for any compliance shortfall."
The report said that sometimes lack of actions from the Anti- Corruption Commission (ACC) was visible in investigating the politically-sensitive cases.
In case of share market scam and manipulation in 2011, the Bangladesh Securities and Exchange Commission (BSEC) and a special tribunal investigated cases associated with politically exposed persons.
Despite involvement of large-scale fraud and corruption, the ACC did not undertake any parallel investigation, indicating that it was waiting for BSEC to complete its investigation, said the report.
"When 6 out of 17 cases were disposed of by the tribunal and four convictions and monetary convictions were imposed, the ACC did not commence any money laundering investigation against those cases. In case of politically-sensitive BASIC Bank scam, the BFIU shared 62 STRs with the ACC in July 2013 regarding fraudulent loans/ advances. However, as of October 2015, the ACC could not appoint an investigation officer."
According to the TIB report, the ACC was found to have intensified its anti-corruption drive in 2016 and 2017. The rate of conviction in corruption cases filed by the ACC (54.2 per cent) and former BAC (45.3 per cent) slightly increased in 2016 while in 2017 (up to July) this rate has increased up to 67.74 per cent.
The ACC received nearly 12,568 graft allegations, of which enquiry was conducted into 1,543 allegations and 543 allegations were sent to departments or ministries concerned of the government for action. The ACC filed 359 graft cases in 2016, and arrested 13 persons for taking bribe and took legal action against them.
A total of 388 graft suspects were arrested in 2016 in different graft cases. The suspects included 168 government officials, 13 people's representatives, eight insurance and other non-banking financial institution officials, 112 businessmen, and 87 bank officials. Some Tk 3,590 million has been recovered out of the money forged from Basic Bank and Tk 30,420 million has been re-scheduled.
However, the TIB report alleged that corruption cases were withdrawn under political considerations.
ACC filed very few corruption cases against leaders of the ruling party in spite of information of amassing huge wealth beyond known sources of income as disclosed in the affidavits during the 2014 election.
It is also alleged that the ACC is subject to political influence and not politically neutral as it has not been able to demonstrate impartiality in handling corruption cases.
In some cases, as alleged by some experts, the ACC played a partisan role and did not take action against all accused equally indicating selective treatment of the accused.
It is also alleged that ACC lodged very few cases against powerful persons of the current ruling party and takes action against staff at lower tiers whereas the main culprits remain untouched or go scot-free.
There have been several evidences which imply that laws and policies are not equally applied to all officials, resulting in an increased risk for misuse of power and grand corruption, said the report.
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