Money laundering: Hate the sin, not sinners!

Why should Taka leave Bangladesh? This could be a better way of asking a question: who takes the Bangladesh currency out of the country? It is mainly because our favourite novelist Sarat Chandra Chattopadhyay once advised us to hate  sin, not the sinners. As far as Bangladesh is concerned, the sinners are the black money holders and launderers engaged in siphoning off huge sums of money from this country every year. The sin is the act of sending money abroad illegally.
Over the past many years, we have apparently waged a war of words - while being feeble in action - to bring the culprits to book through both carrot and stick. Successive governments have shown a lukewarm attitude and provided concessions to enable them to turn the black money into white. But all appeared to be in vain. It is being reported that on an average, Tk 4.0 billion-Tk 5.0 billion has been legalised in each fiscal for the last couple of years. The government got only Tk 450 million-500 million as taxes. To be precise, just Tk 2.37 billion was whitened in 2013-14 fiscal.
 Bangladeshi citizens' deposits in Swiss banks soared to Tk 30 billion in 2013; in the previous year, the amount was Tk 20 billion. But that is only the tip of the iceberg. Money is being laundered to India (Kolkata) to buy cosy flats in posh areas. It is done by the politicians lest they have to leave the country following a turn-around in their political fate. Influential MPs and businessmen from almost all parties have their homes or hideouts in Kolkata. Likewise, Malaysia, Canada and other places, especially the UAE, are safe havens. Malaysia has a "My Second Home" (MM2H) programme under which you need to show assets of just Tk 15 million and a monthly income of Tk 2,00,000-3,00,000 to live there. Under that programme, many Bangladeshis - roughly 3,000 - are reported to have flown to Malaysia. One could possibly argue that a total of Tk 40 billion have been laundered in the absence of  an enquiry into the sources of money in recipient countries and granting the permission by the Bangladesh government. Take the case of Canada, another country that ignores the sources of money of the migrants. There is an area called 'Begum Para' in Toronto where Bangladeshis have bought residential flats for their dearest 'Begums' (wives). Not all of those who live there have laundered money from Bangladesh but a large number has allegedly done so. Most importantly, most of the money is laundered during election year. It has to be so as accumulated money through corruption needs to be siphoned off on the heels of a general election. The fear is that there is a chance of being caught with the possible change of government.
One important source of laundering is over and under-invoicing of imports and exports respectively. This has been an age-old tactic of sending money abroad illegally. Think of the arithmetic when we are told that the national savings rate is higher than the domestic investment rate. If that is so, the surplus seems to be flying out of the country every year. The second important reason for laundering is absence of investment climate in the country to utilise accumulated money, legally or illegally.  It would be naïve to think that only ill-gotten money gets laundered; in fact, accumulated white money may also turn black in the absence of investment opportunities.
Rampant corruption, inadequate infrastructure, and inefficient bureaucracy are the main hurdles in the way of business and investment. The recently-released Global Competitive Index (GCI) survey provides us with no hope. Business circles consider the above-mentioned three factors as most important and Bangladesh ranks the 109th in GCI. Tax regulations, inflation, foreign currency regulations, tax rates and poor human resource base constrain the optimal use of funds. The supply chain is seriously disrupted owing to the miserable road transport system. This does not mean that there are no positive scores.
Bangladesh can definitely be proud of macroeconomic stability, higher enrolment in educational institutions, market size and innovation. But bear in mind that the positive outcomes are overshadowed by their negative counterparts.
Like human beings, capital flies around the globe for fetching a better return although sometimes it may be pushed and pulled. No wonder that the launderers might send money to invest abroad. This may partly explain the phenomenon but not the whole. The main contributing factor in the build-up of black money and its outflows from the country is the lack of the rule of law in containing criminal activities. The laws enacted to prevent corruption and outflows of funds illegally are flawed on many counts. What could we expect in a country where lawmakers are lawbreakers, where, among the lawmakers, there are some who are engaged in such illegal activities? These 'pressure' groups always want to see laws with a lot of loopholes so that they could take advantage of the loopholes.
In a recent attempt in Paschimbanga of India, it is reported that the Chief Minister of the State desired that the Saradha scandal be investigated by a committee formed by the state government. Fortunately, the Supreme Court of that country intervened and ordered that the case be investigated by the Central Bureau of Investigation (CBI). Do we have such an independent judiciary in Bangladesh? The successive Election Commissions have turned into hammer in the hands of the party in power to win elections. The financial market allegedly is full of scams, and legal actions against those culprits rare taken.
The set of institutions that are required to curb accumulation of illegal wealth and its transfer from the country is not there. And political patronage has added fuel to the flight of money. Therefore, let us hate the sin, not the sinners. Given the institutional strength to catch the criminals, the years ahead might witness more of this kind of capital flight. Keeping the dead frog in the well and lifting water will not work.
The writer is a Professor
of Economics at
Jahangirangar University.
[email protected]