Remittances take massive hit from under-invoicing: BFIU 

Importers who tend to do under-invoicing for tax evasion pay the difference to suppliers abroad by purchasing remittance dollars from the hundi market, thus seriously accounting for a fall in remittance inflows, according to the Bangladesh Financial Intelligence Unit (BFIU). 

To evade duties, a section of unscrupulous vehicle importers mainly resorts to under-invoicing to state prices of goods on invoices less than the prices actually paid.

This practice is depriving the country of both taxes and remittances, Md Masud Biswas, head of the BFIU, told the media on Monday. 

Central bank data notes that inward expatriates' remittances fell 15% to a little over $21 billion year-on-year in FY22. In September this fiscal year, expatriates remitted $1.53 billion, down by 25% from the previous month's receipts. 

According to the National Board of Revenue (NBR), customs and supplementary duties on imports of motor vehicles range between 125% and 800%, depending on cylinder capacity. 

To dodge such duties, importers state lower than actual prices on invoices and cover the under-invoiced part through remittance dollars bought from "hundi" dealers, said Masud Biswas while presenting the annual report of Bangladesh Financial Intelligence Unit for FY22.

In FY22, the BFIU received 8,571 suspicious transaction reports (STR) and suspicious activity reports (SAR) from reporting agencies, up by 62% year-on-year, according to the BFIU's annual report. The number of suspicious reports stood at 5,280 in FY21. 

Such reporting has ticked up with transactions going up in post-pandemic times, said the BFIU.

In the last fiscal year, the BFIU itself reported about 40% and the rest came through various reporting agencies. The banking system accounts for about 93% of such reporting, money remitters reported more than 5%.

The reporting organisations are legally obliged to submit suspicious transaction and activity reports. When any sort of anomaly is found, the reporting organisations submit STR and SAR spontaneously based on their knowledge and understanding of the robust Anti-money Laundering (AML) and Combating Financing of Terrorism (CFT) regime. 

A suspicious transaction or activity reporting system has been introduced to protect the reporting organisations from being exploited by the money launderers and terrorist financiers and to ensure the soundness of the national AML & CFT programme.

Masud Biswas put the rise in STR and SAR reporting down to the BFIU's increased activities.

Cash transactions in the financial sector rose owing to various stimulus packages post-Covid-19, he noted.

According to the BFIU report, in FY22, cash transactions in the banking system amounted to Tk21,11,000 crore in contrast to Tk14,43,000 crore in FY21. 

The BFIU head said Bangladesh is mainly facing trade-based money laundering. This happens through over-invoicing from 20% to 200% for some products.

What is once siphoned off cannot be repatriated, he noted, adding that the BFIU does not have any information about how much money has been laundered. 

Over-invoicing is now not happening thanks to the Bangladesh Bank's various strictures on LC opening for the last three months, Masud Biswas continued.

"We are working independently to check money laundering. But we currently have some shortage of manpower," he also said.

Regarding Swiss banks, Masud Biswas said, "We often see information that the amount of money deposited by Bangladeshi nationals in the Swiss banks has increased. We discussed it with them. In Swiss banks, individuals' deposits stand at 3% and the rest is on the bank-to-bank level."

"We have sought some information from Switzerland, which they are unable to provide due to legal complexities. But they have now changed the law and will share individual-level data from January next year," he added. ***