Capital flight, financial mismanagement, bleeding from the economy
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Capital flight, financial mismanagement, bleeding from the economy

ILLEGAL cross-border remittances or suspicious transactions are a concern for Bangladesh, which has reached new heights due to the recent instability in the foreign exchange market and the consequent situation in the resource market. According to the budget document, the Bangladesh Smart Finance Unit received 12,046 reports of suspicious transactions and activities in the first nine months of the ending financial year. In February, Bangladesh’s Financial Intelligence Unit’s annual report showed it had received a total of 14,106 reports, including 9,769 suspicious transactions and 4,337 suspicious activity reports in 2022-23. In April, a World Bank report revealed that approximately $3.15 billion flows out of Bangladesh through illegal offshore accounts every year. The 2020 State of Fiscal Fairness Report estimated Bangladesh’s overseas financial wealth at 0.7% of the country’s gross domestic product. The number of suspicious bank loan transactions has more than quadrupled in the last few years due to rising rates of loan fraud – the number of suspicious bank loan transactions increased to 520 in 2022-23, from 341 in 2021-22 and 98 in 2020–21. The intelligence unit believes that at least half of the suspicious transactions involve capital flights. The Finance Minister also admitted that the number of suspicious transactions has increased alarmingly, but the steps they have taken are clearly ineffective.

In the past financial year, the FIU suspended 27,860 individual mobile financial services accounts, two MFS providers, blocked 291 websites, 33 applications and 464 social media platforms. While these steps are important in stopping everyday online financial crimes such as online gambling and betting, gaming, cryptocurrency trading and hundi, they do not address large-scale capital flight involving politically influential districts. The Financial Intelligence Unit report itself confirmed that the diversion of money is mainly through trading and over-invoicing, and that in some cases over-invoicing is found by 20-200%. They routinely prepare reports on suspicious transactions and submit them to the Criminal Investigation Department, the Anti-Corruption Commission, the National Tax Chamber and other agencies. Reportedly, there is a list of suspicious transactions containing the names of people involved in money laundering and financial fraud, but the government has made little or no effort to bring the money launderers to justice or recover the money. The government appears to be more proactive in hiding information than in curbing money laundering and financial fraud. This trend is assumed to exist because the names allegedly feature influential politicians, government officials and businessmen.

For the incumbent to ensure sustainable economic growth, it must abandon political patronage towards money launderers and urgently address the issue of illicit capital flows by establishing an effective and reliable mechanism to check the unabated practice of trade mis-invoicing and other forms of illicit financial transactions. In addition to a reasonable investigation into allegations of money laundering, the government must immediately initiate diplomatic proceedings with “tax haven” countries to recover money that has already been taken out of the country.