In contemporary times, especially after the 9/11 terrorist attack on the US, international effort to combat money laundering has gained momentum. Financial crimes like money laundering pose a direct threat to security as well as stability, transparency, and efficiency of financial systems. In Bangladesh, money laundering is also seen as financial as well as security threat.
The Financial Action Task Force (FATF), the key international body regarding anti-money laundering, has come forth with 40 recommendations as a guideline for combating money laundering and financing of terrorism. The international standards on fighting money laundering crimes suggest assessing risks and applying risk-based approach, customer due diligence and keeping day-to-day record on transactions. These also require focus on suspicious transactions reporting to central bank without alerting the clients, creating the Financial Intelligence Unit (FIU), international cooperation in all issues related to money laundering and adoption of internal mechanisms by the financial institutions. Maintaining comprehensive statistics and regulating the financial institutions are also some of the measures to deal with money laundering.
In line with the international standards and initiatives, Bangladesh amended its Money Laundering Prevention Act, 2002, the first in South Asia. The law was enacted to meet the international standards and to make an effective anti-money laundering regime in Bangladesh. But Bangladesh is facing challenges in complying with international standards on anti-money laundering mechanism.
Firstly, the Financial Intelligence Unit (FIU) of the Bangladesh Bank (BB) was formally established in May 2007 as a unit within the Anti-Money Laundering Department (AMLD). The FIU has taken significant steps to develop its capacity to receive, analyse and publicise Short Tandem Repeat (STRs), Click-Through Rate (CTRs) and other data. The FIU faces some limitations to combat money laundering as it has no direct access to any financial, administrative, or law enforcement databases of the National Board of Revenue, the Bangladesh Police, the Customs, the Passport Office etc. In addition, there is a capacity gap of the current database (e.g. i2 Software and Analyst Notebook) used by the FIU.
Secondly, information gap about the volume and the laundering techniques of the crime is one of the prime challenges to combat money laundering. In Bangladesh, Customer Due Diligence (CDD) or Know Your Customer (KYC) policies have not been applied properly by banks or financial and non-financial institutions. So, the institutions cannot get required information about the customers' identities when they are involved in suspected transactions.
Thirdly, Bangladesh faces limitations to maintain comprehensive statistics and data base to review the effective operation of the Anti-Money Laundering Act. Bangladesh is facing money laundering risks because of the lack of credible information and data base. In addition, the Anti-Corruption Commission has not yet established effective lines of communication and co-ordination with the Criminal Investigation Department and the FIU. Due to the gap, processes of investigation become time-consuming.
Fourthly, in this era of globalisation, free flow of funds and investment around the world has given opportunity for the launderers to transfer money from one region to another. Most of the reporting agencies do not have efficient software to identify these launderers. In recent years, this issue has also come to limelight in various prominent financial institutions and banks.
Finally, the weak regulatory administration of Bangladesh, in a few cases, facilitates money laundering by the criminals. Though rules and laws exist, challenges also remain to implement those rules by the financial institutions against these powerful groups with poor regulatory administration. It has been reported by the US-based Tax Justice Network that among the countries of South Asia, Bangladesh is the second largest country, after India, from where a large amount of money is being hidden abroad by deceiving the revenue or the tax authorities.
It is imperative to counter the challenges regarding combating money laundering crime. To deal with it, comprehensive database software needs to be used by anti-money laundering authority of Bangladesh. Automated system and online software should be used in every financial institution. It is the need of the hour to arrange regular inter-agency meeting and coordination with the Financial Intelligence Unit of the Bangladesh Bank and the Anti-Corruption Commission. The financial institutions need to strictly apply 'Know Your Customer' (KYC) policy. The Bangladesh Financial Intelligence Units (BFIUs) should be made more strong and effective.
While combating money laundering, the Bangladesh Bank finds that the government does not usually act in proper time. Most importantly, political will to combat money laundering crime is badly needed.
The writer is a Research Officer at the Bangladesh Institute of Law and International Affairs (BILIA). [email protected]
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