Exposing money laundering: How illicit funds escape Bangladesh – cinetotal.com.br

Report on Illicit Financial Flows from Bangladesh and Their Impact on Sustainable Development Goals

This report analyzes the systemic issue of money laundering and illicit capital flight from Bangladesh, framing it within the context of the nation’s commitment to the 2030 Agenda for Sustainable Development. The outflow of illicit funds represents a significant impediment to achieving key Sustainable Development Goals (SDGs), particularly SDG 16 (Peace, Justice and Strong Institutions), SDG 8 (Decent Work and Economic Growth), and SDG 10 (Reduced Inequalities).

The Scale of Illicit Outflows: A Threat to National Development

Evidence from Global and Domestic Investigations

A substantial body of evidence points to a pervasive money laundering problem involving a wide spectrum of actors. Key findings include:

• International Leaks: The Panama Papers, Paradise Papers, and Offshore Leaks have implicated dozens of Bangladeshi individuals and entities, including prominent business figures, politicians, and officials, in holding undeclared offshore assets.
• Corporate Fraud: An investigation by the Anti-Corruption Commission (ACC) revealed a case where AB Bank officials allegedly siphoned Tk236 crore to the UAE and Singapore between 2014 and 2016 through fraudulent offshore banking loans.
• Criminal Fugitives: The case of Rabiul Islam (Arav Khan), a gold trader convicted of murder, illustrates how illicit funds facilitate escape from justice. He fled Bangladesh and established a jewelry business in Dubai, showcasing the transnational nature of these criminal networks.

Quantifying the Economic Drain and its Impact on SDG 8

The economic impact of this capital flight is severe, directly undermining SDG 8 by diverting resources essential for sustainable economic growth and job creation.

• The Central Intelligence Cell (CIC) of the National Board of Revenue (NBR) identified assets worth at least Tk40,000 crore laundered abroad by 52 influential individuals and institutions.
• A total of 346 properties have been identified in countries including Singapore, Malaysia, Dubai, London, and the United States.
• This massive outflow represents lost capital that could have been invested in domestic infrastructure, industry, and social programs, thereby hindering progress towards national development objectives.

Systemic Corruption: Undermining SDG 16 (Peace, Justice and Strong Institutions)

The Widespread Nature of Illicit Financial Practices

Contrary to the perception that money laundering is a crime of the elite, evidence suggests it has become a systemic issue embedded across various societal layers. This “democratization” of corruption erodes public trust and weakens the very foundations of governance, directly contravening the aims of SDG 16.

• Professional Complicity: Economists note the involvement of various professionals, including doctors under-declaring income, lawyers handling dubious transactions, and contractors over-invoicing projects.
• Public Sector Corruption: The ACC has raised alarms about public servants illicitly obtaining dual citizenship and foreign passports to conceal ill-gotten wealth and evade accountability, a clear breach of public service integrity and a threat to achieving SDG Target 16.5 (substantially reduce corruption and bribery).
• Prevalent Methods: Key mechanisms for laundering include trade-based mis-invoicing, informal ‘hundi’ transfer systems, and exploiting formal banking channels.

Challenges in Asset Recovery and the Need for Global Partnerships (SDG 17)

Ineffective Repatriation and Institutional Failures

Efforts to recover stolen assets have yielded minimal results, highlighting a critical failure to meet SDG Target 16.4, which calls for strengthening the recovery and return of stolen assets. Despite the formation of committees and the seizure of assets worth approximately Tk5,000 crore, this represents a fraction of the estimated total laundered abroad. The politicization of anti-corruption efforts, where scandals are used as political tools, has obscured the need for structural reforms.

Obstacles to International Cooperation

The recovery process is hampered by significant challenges in securing international cooperation, a key component of SDG 17 (Partnerships for the Goals).

• Domestic agencies often lack the airtight evidence and legal convictions required by foreign jurisdictions to act.
• Mutual Legal Assistance Requests (MLARs) have been sent to 20 countries, including the United States, Singapore, and the UK, but progress remains slow.
• This underscores the urgent need for stronger bilateral and multilateral agreements to effectively trace, freeze, and repatriate illicitly acquired assets.

Policy Recommendations for Aligning with the 2030 Agenda

A Differentiated Approach to Illicit Flows

Financial analysts recommend a two-pronged strategy that distinguishes between different types of laundered money:

1. Proceeds of Crime: For funds originating from criminal activities like bribery and fraud, a punitive approach focused on strict legal enforcement and asset recovery is necessary to uphold the rule of law (SDG 16).
2. Legitimate Income Flight: For legally earned income sent abroad due to policy uncertainty or lack of investment security, the focus should be on creating an enabling environment through incentives, tax breaks, and secure investment channels to encourage repatriation and reinvestment in the domestic economy (SDG 8).

Strategic Actions for Strengthening Governance and Prevention

To effectively combat money laundering and align with the SDGs, a coordinated and prevention-focused strategy is essential.

• Depoliticize Enforcement: Anti-corruption agencies must operate independently and apply the law equally to all individuals, regardless of political affiliation, to build trust in public institutions (SDG 16).
• Enhance Institutional Coordination: A coordinated effort among the NBR, BFIU, ACC, and CID is critical for a comprehensive response.
• Prioritize Prevention: The primary goal should be preventing money from leaving the country. This requires tackling corruption within key bodies like the NBR and customs to close systemic loopholes.
• Adopt International Best Practices: Bangladesh should study and adapt successful asset recovery legislation from neighboring countries like India, which has aggressively enforced its Prevention of Money Laundering Act.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 16: Peace, Justice and Strong Institutions: The article’s central theme is money laundering, corruption, and the failure of institutions to combat these crimes. It discusses illicit financial flows, bribery, the lack of accountability in public service, and the ineffectiveness of investigative agencies like the Anti-Corruption Commission (ACC) and Bangladesh Financial Intelligence Unit (BFIU). These issues are at the core of SDG 16, which aims to build peaceful, just, and inclusive societies with effective, accountable institutions.
• SDG 8: Decent Work and Economic Growth: The massive outflow of capital, estimated at “at least Tk40,000 crore,” directly undermines Bangladesh’s economy. The article notes that such activities “undermine the country’s economy and the integrity of public service.” This capital flight reduces domestic investment, hampers job creation, and destabilizes the financial system, thereby impeding sustainable and inclusive economic growth as promoted by SDG 8.
• SDG 10: Reduced Inequalities: Money laundering and corruption exacerbate inequality. When elites, including “prominent business figures, politicians, and government officials,” illegally transfer wealth abroad, they evade taxes and divert resources that could be used for public services like education, healthcare, and infrastructure. This concentrates wealth in the hands of a few and deprives the general population, widening the gap between the rich and the poor, which SDG 10 aims to reduce.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. Target 16.4: By 2030, significantly reduce illicit financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organized crime.
   • The entire article is a detailed exposition of illicit financial flows from Bangladesh. It explicitly mentions how “illicit funds escape Bangladesh” through methods like “trade-based money laundering,” “hundi operators,” and embezzlement via offshore banking. The article also highlights the failure in asset recovery, stating that “no meaningful recovery has taken place” despite identifying “thousands of suspected accounts and properties abroad.”
2. Target 16.5: Substantially reduce corruption and bribery in all their forms.
   • The article describes corruption as a “social disease” that has become “democratized” and is “embedded in every layer of society.” It provides examples of corruption among “public servants secretly acquiring dual citizenship,” “doctors under-declar[ing] income,” “contractors over-invoic[ing] projects,” and bank officials embezzling funds. The ACC’s investigation into officials violating the Government Service Act to “conceal ill-gotten wealth abroad” is a direct reference to this target.
3. Target 16.6: Develop effective, accountable and transparent institutions at all levels.
   • The article critiques the ineffectiveness of Bangladeshi institutions. It states that agencies like the ACC, BFIU, and CID have “dismal” results in asset recovery and are “plagued by party influence.” The call for these agencies to “work more efficiently and in a coordinated manner” and the criticism that “the law has been used selectively” point directly to the need for more effective, accountable, and transparent institutions.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Indicator 16.4.1: Total value of inward and outward illicit financial flows.
  • The article provides specific figures that can serve as a baseline for this indicator. It mentions that “influential individuals and various institutions in the country have built assets worth at least Tk40,000 crore abroad.” It also cites a case where “AB Bank officials allegedly siphoned off Tk236 crore.” These figures represent outward illicit financial flows.
• Indicator 16.4.2: Proportion of seized, frozen or confiscated assets, returned to the country of origin.
  • The article implies this indicator by highlighting the lack of progress. It states that while “assets worth about Tk5,000 crore have been seized in joint operations,” the overall results “remain dismal” and “no meaningful recovery has taken place.” It contrasts this with successful recoveries in other countries, such as India recovering “Rs23,000 crore” and Pakistan recovering “£190 million from the UK,” providing a benchmark for what successful asset recovery looks like.
• Indicator 16.5.2: Proportion of persons who had at least one contact with a public official and who paid a bribe to a public official, or were asked for a bribe by those public officials.
  • While the article does not provide a quantitative survey result for this indicator, it provides strong qualitative evidence. The description of corruption as a “social phenomenon” involving “doctors,” “lawyers,” “contractors,” and “mid-level bureaucrats” implies that interactions involving bribery and corruption are widespread. The ACC’s alarm over “public servants secretly acquiring dual citizenship” to evade scrutiny for corruption further supports this.

4. Summary Table of SDGs, Targets, and Indicators

Source: cinetotal.com.br