After US Visa Policy, Bangladeshi Illicit Money Looks For New Safe Haven

Middle East, East Europe beacon as new destination for illegal money

Md. Saiful Islam

Ultra-rich Bangladeshis, especially those who have amassed immense illegal wealth, no longer feel safe stashing their dirty money in the United States due its sanctions and recently announced visa policies.

They are also distrustful of other western countries under strong US influence. Canada has already made it difficult for foreigners to invest in property since the beginning of this year.

Due to its strict privacy policy, Switzerland is known as one of the safest places for hoarding black money. Now Bangladeshi investors are withdrawing their deposits from there too. To them, even the much-vaunted Swiss vaults seem no longer safe. Just within a year, the Bangladeshi deposits in the Swiss vaults shrank by a whopping 94 per cent, according to a report of the Swiss National Bank. 

Financial crime experts suspect that East European countries like Poland, Hungary, Romania and Slovenia are turning into the new destinations for dirty money deposits from Bangladesh. Corrupt civil servants, law enforcement officers, businesspeople, bank executives are suspected to be involved in these acts of large-scale financial crimes.

Finance sector observers hold that the US sway on these East European countries is comparatively low. The ability of regulatory authorities in Eastern European countries to detect or control financial crimes has also been questioned at various times. According to Dublin-based financial crime watchdog AML Intelligence, the Eastern European region has repeatedly been marked as one of the continent's main gateway corridors for illicit money transfers. The revelations of various financial crimes at different times have exposed the scale of the money laundering problem in the region.

Leaked documents such as the Panama Papers and the Pandora Papers have already raised global concerns about money laundering using complex corporate structures and offshore shell investments. Dirty money generally gets laundered through fraudulent trade invoicing, free trade zone and foreign trade, fake foundation, property investments, private investment fund, etc.

The Bangladesh Bank, the Anti-Corruption Commission (ACC) and law enforcement agencies have identified 'Hundi' as a major means of money laundering. According to the United Nations Conference on Trade and Development (UNCTAD), the three main sources of dirty money are corruption, criminal activities and corporate tax evasion.

UN estimation shows that the total amount of money amassed through corruption across the world each year is 5 per cent of the total global GDP. In terms of the world’s GDP of 2020—$ 103 trillion— the amount of money originated from corruption globally stands at more than $ 5 trillion. Organized international crimes alone account for around $ 2 trillion every year. In addition, the amount amassed through tax evasion across the world is $ 50 trillion every year.

In Europe, the eastern part of the continent is seen as a major gateway corridor for money laundering. AML Intelligence observes that money-laundering networks and organized crime groups have spread a complex web of financial institutions across Eastern Europe to transfer illicit money from the European Union and non-EU territories. Money laundering often remains unabated due to the inability of regulatory agencies in detecting or uncovering criminal activity.

Experts say that people involved in money laundering are now choosing places with poor financial governance as safe destinations for money smuggled out of Bangladesh. As such, Eastern European countries have become one of the most attractive destinations for money transferred from Western countries, including the US, Canada and Switzerland. 

In recent times, the information on the transfer of large amount of Bangladeshi investments to the Middle Eastern countries, especially the United Arab Emirates, has come to the fore.

Former Bangladesh Bank governor Salehuddin Ahmed said, ‘Swiss banks are no longer safe to stash money as before. Now they have started disclosing the amount of money coming from foreign countries. I believe, money launderers fear that in future, Swiss banks may start revealing the names of clients. Bangladesh's relations with European and American countries are not as warm as they used to be. That’s the main reason the launderers are transferring money from Switzerland and Western countries to countries where the governance of financial sector is relatively weak. In the current scenario, it will be the Bangladesh Bank's responsibility to rein in Hundi by any means and prevent money laundering. And the Bangladesh Financial Intelligence Unit (BFIU) should also be allowed to work independently.’

According to the US-based Global Financial Integrity, around $ 9 billion was laundered from Bangladesh between 2011 and 2018. From 2005 to 2014, the yearly average amount of the money trafficked from Bangladesh was $ 6.4 billion. Between 2014 and 2018, this average increased to $ 8.27 billion. Experts suspect, since then the average amount of the laundered money might have increased further.

Bangladeshi investments have also been often reported in offshore investment paradise island countries like Barbuda and Cayman Islands. In the past, Panama Papers and Pandora Papers also exposed some Bangladeshi people's names that are involved in investing in foreign countries with the help of shell companies. Experts fear that smuggling of money to Middle East and Far East countries like Singapore, Malaysia, Thailand, Hong Kong (the most eastern countries of Asia) may increase further. They recommend that it is an imperative to monitor Bangladeshi investment in these countries. Many Bangladeshis are building a second home in these countries. The list includes politicians, bank-insurance owners, middle-class businessmen and contractors, as well as corrupt government officials.

ACC panel lawyer Khurshid Alam claims that it is the government's strong effort to rein in money laundering that compels the launderers to look for new ways to divert money to safe destinations. He told Bonik Barta, ‘We have learnt about the diversion of deposits from Switzerland very recently. But the perpetrators of money laundering cannot run away outside our network. Our modus operandi is 'follow the money, follow the crime.' We hope to learn from Switzerland about the new destinations of the diverted money. Many say that Bangladeshis are withdrawing money from Swiss banks due to various crises emerged recently including dollar crisis. But dollar crisis doesn’t seem to be the cause of the withdrawals. In fact, Bangladesh is trying hard to bring the smuggled money back to the country. The ACC and the CID are also taking very quick steps.’

In Bangladesh, Saudi Arabia has long been the largest source of remittances. But in the current fiscal year, surprisingly the remitted money to Bangladesh from US exceeded that from Saudi Arabia. According to the data of the US government, the number of Bangladeshis employed in the US is 0.15 million. And the Bangladesh Bank data shows, the remittances from the US in the first 10 months of the FY23 (July-April) amounted to $ 3.04 billion. This estimates the per capita remittance from Bangladeshi expatriates working in US to $ 2,000 every month. But some expatriates said that it is impossible for the majority of Bangladeshi expatriates to send $ 2,000 to the country as the cost of living in the US has risen due to high inflation. A large part of Bangladeshis are staying there mainly as students. It is not possible for them to send such a huge amount of money to the country to bear the tuition fees and living expenses of American universities. Various monitoring organisations and research institutes have already raised questions about the flow of remittances from the US. Some expressed doubt on the matter saying that the money smuggled out of the country is now being brought back or transferred in the form of remittances.

Experts believe that US restrictions and visa policy can play a big role in this regard. Diplomats also say that the impact of US visa restrictions is far-reaching. That’s why money launderers do not consider it safe to invest or keep money in the US or Western countries.

M Humayun Kabir, a former ambassador of Bangladesh to the US, told Bonik Barta, ‘When the US imposed sanctions on Bangladesh, the US Department of Treasury was also involved in it.’ And the involvement of the treasury department means that people under the sanctions will not be able to engage in any US-based financial transactions in the future. That’s why many of the money launderers might have become cautious. In that case, they can no longer consider the US safe. Now it is heard that these funds are being diverted to different countries in the Middle East. If there are any restrictions in the visa policy, restrictions do not mean only restrictions. It involves many other procedural issues. So I think they will be more careful in that regard as well. After all, they may no longer want to keep money in the US.’

Western countries that are US allies have always been seen to follow US-imposed sanctions and policies.

Once a mere tourist destination, now Dubai's name is coming up again and again as a hub for overt and undercover investments. Many businesses in the country are now doing business from Dubai. In search of attractive profits, many Bangladeshis are investing in other businesses besides real estate in the UAE. The country is also eager to seize the inflow of foreign capital. For this reason, various facilities are being given to rich foreign people to migrate.

Over the decades, large amounts of capital have been transferred to Dubai, both overtly and covertly, from various countries around the world. With the reinvestment of this money, Dubai's financial, real estate, and real estate sectors are booming. The UAE introduced the Golden Visa in 2019 to attract wealthy foreigners. Taking advantage of this opportunity, rich people of the country, including bank directors, top executives and mid-level officials of banks have now applied for the Golden Visa. Experts suspect that a huge amount of capital has been smuggled there through Golden Visa-holders in Dubai. In the current situation, money laundering is expected to increase again.

Financial experts fear that money laundering from Bangladesh will also increase in the countries of the Far East, which has been discussed for a long time as a destination. In this regard, they feel that it is necessary to increase the monitoring of new investments of Bangladeshis especially in Singapore, Malaysia, Thailand and Hong Kong.

Singapore is one of the biggest hubs of international trade conducted from Bangladesh. The country now ranks third in the Global Financial Privacy Index. There have long been allegations of money laundering by exploiting the facilities of one of Asia's largest financial and commercial hubs. It is expected to increase in the coming days. According to various sources, the import-export trade is the largest source of money laundering in Singapore. Many traders in the sector have to travel there regularly to import machinery for the textile and apparel sector. It is alleged that some of them are transferring money there.

Professor Dr Mainul Islam, a renowned economist, said that it is necessary to take a strict stand against corruption by the government to stop money laundering. He told Bonik Barta, ‘The strict maintenance of secrecy in the Swiss banks has made them attractive for money laundering. Now due to technological progress, various schemes of money laundering have been invented. That’s why there is no longer any need to approach a Swiss bank. Due to the Hundi system, capital is being laundered very easily in many countries of the world. The Middle East has again become a safer place than Switzerland. Now the vast majority of expatriates send remittances to the country through the Hundi system. Foreign currency stays abroad. Hundi-walas send the same amount to the country. As a result, the hundi system has become popular and money is no longer flowing through institutional channels. One and a half million expatriates are living outside the country. So the amount of remittance is supposed to increase. But it has decreased.‘

Malaysia is another attractive destination for money laundering. The country is giving opportunities to foreigners to build a second home in the investment quota with various facilities. The number of applications for immigration permits to the country is now increasing, especially through the 'Malaysia My Second Home' or MM2H programme. To apply under this program, the applicant must show liquid assets like cash, bank deposits or easily monetisable investments of at least 1.5 million ringgit. According to the current exchange rate, it is a little more than Tk 3 crore 47 lakh (1 Malaysian ringgit = 23 taka 13 paisa). Besides, the monthly income must be shown to be equivalent to at least 40 thousand ringgit (a little more than Tk 9 lakh 25 thousand).’

The BFIU under the Bangladesh Bank is mainly responsible for detecting, collecting and monitoring money laundering. BFIU chief Masud Biswas said, ‘There may be various reasons behind the decreasing of money in the Swiss bank. Due to the dollar crisis, the deposits in the Nostro accounts used by the country's banks for business with Swiss banks have decreased. Bangladeshis living in Europe are struggling to live due to high inflation and economic instability. Their deposits in Swiss banks may also decrease because of this. After the news of Credit Suisse going bankrupt broke out, many people, including Bangladeshis, panicked and withdrew money from Swiss banks. We suspect that the laundered money may have moved to countries with poor financial governance.’

When asked about whether the smuggled money is being returned as remittance, Masud Biswas said, ‘We do not have any information regarding this.’ We are seeing an increase in remittance flows from Europe-America countries through legitimate channels. We always welcome remittances through legitimate channels.’

The Criminal Investigation Department of the police also often investigates money laundering offenses. When asked about the organisation's steps and actions to prevent money laundering, CID spokesperson Additional Superintendent of Police Azad Rahman told Bonik Barta, ‘We are working in coordination with the BFIU to prevent hundi and money laundering.’

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