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A US Department of State report has said a substantial amount of Bangladesh's hard currency is drained out for supporting an estimated $1.0 billion US dollars worth of dutiable goods smuggled into the country from India every year.
"An estimated $1.0 billion dollars worth of dutiable goods is smuggled every year from India into Bangladesh. A comparatively small amount of goods is smuggled out of the country into India. Instead, hard currency and other assets flow out of Bangladesh to support the smuggling network," the report on money laundering said.
It said the principal money laundering vulnerability remains the widespread use of the underground hawala or hundi system to transfer value outside the formal banking network.
The report said the vast majority of hawala transactions in Bangladesh are used to repatriate wages from Bangladeshi workers abroad.
It said the hawala system is also used to avoid taxes, customs duties and currency controls and as a compensation mechanism for the significant amount of goods smuggled into Bangladesh.
"The non-convertibility of the local currency (the taka) coupled with intense scrutiny on foreign currency transactions in formal financial institutions also contribute to the popularity of both hawala and black market money exchanges," the report released this month said.
It said during the year 2004, there has been a significant increase in the amount of money transferred through the formal banking system as a result of the efforts by the Bangladesh government to increase efficiency.
The Bangladesh Bank has received 148 suspicious transaction reports since the Money Laundering Prevention Act (MLPA) was passed in 2002, of which 134 were resolved without further action. The remaining 14 reports are under investigation, the report said.
It said the Bureau of Anti-Corruption (BAC), which prosecuted cases under the MLPA, was pursuing 17 cases in 2004. These cases were transferred to the Anti-Corruption Commission, which officially came into existence in November 2004, where they remain pending, it said adding that another 22 money laundering related cases in connection with the Zia International Airport are under pending with the courts.
The report said the country does not have a law that makes terrorist financing a crime and Bangladesh has not signed the UN International Convention for the Suppression of the Financing of Terrorism or the UN Convention against Transnational Organised Crime.
The report suggested that the government of Bangladesh should criminalise terrorist financing and should also create a centralised Financial Intelligence Unit (FIU) to receive suspicious transaction reports and disseminate information to law enforcement.
The report also suggested Bangladesh to sign and ratify the UN International Conventions for the Suppression of the Financing of Terrorism and against Transnational Organized Crime.
"Customs and law enforcement agencies should be more cognisant of money laundering in general and trade-based money laundering specifically. Judicial and prosecutorial reforms will be necessary to counteract case backlog and current lengthy delays in dispensing justice" the report recommended
The report was prepared across the world in order to check and control terrorist financing activity in a core set of approximately two-dozen countries around the world, sources said .Accordingly, the bulk of U.S. anti-money laundering technical assistance is focused on making these countries less vulnerable to the terrorist financing threat and the study and supervision was carried as part of the initiative, sources added.
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