Experts for remedial steps against financial crimes

Published : 29 Sep 2020 08:57 PM | Updated : 29 Sep 2020 09:06 PM

The economic downturn, triggered by theongoing COVID-19 pandemic, has created a hole through which money launderersand fraudsters seek to amass huge sums of cash by resorting to illicit trade, including financial crime and security experts warn, reports BSS.

In many cases, criminals and terrorists are attempting to profit byposing as genuine businesses, an ominous symptom that signals the ongoingpandemic might lead to an increase in organised crime.

In view of the whole situation, financial security experts recommendcollective efforts are required, including across law-enforcement agencies,to combat illicit trade in order to generate national revenue and acceleratethe country’s economic recovery and development activities.

Furthermore, regulatory bodies must consider whether current internalcontrol and compliance frameworks can identify COVID-19 related fraud andillegal activities. Firms must be able to satisfy regulators by demonstratingupdated risk procedure and internal control mechanisms to reduce risks of anypossible financial crime, they added.

“Trade-based money laundering is mostly committed in Bangladesh. Thegovernment is firmly committed to tackling this serious issue to save itseconomy,” said Abu HenaMohdRazee Hassan, Head of the Bangladesh FinancialIntelligence Unit (BFIU) of the Bangladesh Bank.

“At the beginning of the pandemic, we instructed banks and otherfinancial institutions to take strict measures so that none can takeadvantage of the new circumstance,” he added.

Referring to a recent study, he informed, around 80 percent of illegalcapital flight globally takes place through illicit trade, or around 60percent in Bangladesh.

“Developing nations are mostly vulnerable to such risks as it has becomea major threat to their growth and sustainable development. Taking these intoconsideration, Bangladesh is fully committed to remain at the forefront ofglobal efforts to fight Trade Based Money Laundering and Terrorist Financing

(TBML/TF) risks,” he added.

Against this backdrop, considering the fact that international tradetransactions are mainly held through banking system of the country, BFIU hasissued guidelines for banks suggesting they establish appropriate measuresand techniques to combat TBML/TF, he said.

Earlier, at the beginning of 2020, Director General of the CustomsIntelligence and Investigation Directorate (CIID) Muhammad MubinulKabir toldthe media that global trade was disrupted by the emergence of Coronavirus(COVID-19), a pandemic that has devastated normal life in all parts of the world.

The government of Bangladesh has responded to the pandemic with acomprehensive set of measures, including travel restrictions, socialdistancing measures, strict hygiene protocols and direct interventions innational economies, he added.

With global supply chains severely disrupted and economic activitieshalted for travel and transportation restrictions to check transmission ofCoronavirus, some organised transnational crime networks have taken advantageof ineffective regulatory frameworks and supply shortages. The problem is so large that the World Economic Forum (WEF) estimatesover US$2.2 trillion, some 3 percent of global GDP, will be lost due toillicit trade leakages in 2020. Many of these will double within five years. Counterfeiting and smuggling of fake, tainted or counterfeited alcoholand tobacco products have become big business for criminals, as lockdowns andbans on excisable goods cost governments hundreds of millions of dollars inlost revenue.

For example, a ban on cigarette sales in South Africa fuelled a blackmarket that lost the finance ministry around US$2.2 million per day. Similarlosses were seen in Malaysia and the Philippines, which have also hadcigarette bans during lockdowns.

The United Nations Office on Drugs and Crime (UNODC) has warned thatCovid-19 has created new opportunities for organized crime to profit,including human traffickers who are increasingly active and preying on peoplewho are more vulnerable than before due to the economic costs of the pandemic.

Often the ‘front door’ is illicit tobacco sales or financial crime butbehind that is a more sinister business of trafficking and modern slavery.

As markets reopen, and Covid restrictions are gradually lifted, it isvital that organised criminal groups are not allowed to prosper further bycapitalising on job losses and dwindling buying power.

To protect against illegal activities, the director general said, thegovernment instructed all concerned to remain more aware and check illicittrade with strict hands.

Muhammad MubinulKabir said that, so far, a total of 82 cases, involvingaround Taka 3,200 crore, have already been filled on trade-based moneylaundering.

The Global Financial Integrity report has ranked Bangladesh as one of thetop countries facing trade-based money laundering (TBML), which is asignificant threat to growth and sustainable development.

Senior Research Fellow at the Centre for Policy Dialogue (CPD) TowfiqulIslam Khan said the government has adopted a new strategy titled ‘NationalStrategy for Preventing Money Laundering and Combating Financing of Terrorism2019-2021’ to combat trade-based money laundering and illicit financial outflow from the country. He urged the authorities concerned to implement the strategy effectivelyand check illicit trade to help the country achieve development goals.

The budget for fiscal 2020-21 has imposed 50 per cent penalty on mis-declaration of exports, imports and investment in foreign countries. Thisseems to be a sound proposal from the revenue point of view.