Up to Tk5 lakh fine for irregularities in forex transactions

The Bangladesh Bank is formulating rules to penalise banks' authorised dealer branches and money changers with up to Tk5 lakh for irregularities in foreign exchange transactions.

Currently, the institutions face licence cancellation and lawsuits for violating the existing guidelines of the central bank.

Seeking anonymity, a senior official at the Bangladesh Bank said the regulator rarely cancels a licence for an irregularity as such action eventually disrupts the activities of other companies.

Because import-export operations of thousands of companies are done through an authorised dealer branch of a bank, he added.

"As there is no penalty for such irregularities, some companies go for over-invoicing and under-invoicing of their import-export trade. To prevent such irregularities, rules are being formulated afresh to penalise the institutions," said the official.

In a letter to the Financial Institutions Division on 22 November, the central bank said a section was inserted by amending the Foreign Exchange Regulation Act 1947 in 2015 to regulate authorised dealers and money changers. But, no rule has been formulated to determine penalties for irregularities. Due to this, the Bangladesh Bank could not take any action against those involved in irregularities.

Therefore, in view of this, the central bank is going to formulate rules to bring discipline to the local foreign exchange market and the country's import-export trade activities and to build and control proper market infrastructure, read the letter.

The central bank official further said that recently there have been irregularities in the import of products through these authorised dealer banks and the prices of export products are not being repatriated as per rules.

As a result, the risk of money laundering to foreign countries under the guise of import and export trade has increased. Banks are often directly involved with this. Therefore, to prevent these irregularities, a new rule is going to be formulated, he added.

Former governor of the Bangladesh Bank Saleh Uddin Ahmed said that banks, exchange houses and money changers get involved in irregularities in foreign currency transactions. Even if the central bank gets evidence through monitoring, it cannot take appropriate measures due to the weakness of the regulations.

"If institutions do not face appropriate penalties against irregularities, then they will not pay attention to any central bank directives. So this rule will be worthy," he added.

According to the sources, authorised dealer branches of banks and money changers will face fines from a minimum of Tk5,000 to a maximum of Tk5 lakh for non-cooperation with Bangladesh Bank inspectors, providing any false information and intentionally destroying or misplacing documents under the new rule.

And if this irregularity continues, then from the first day, a fine of Tk1000 to Tk10,000 per day will be imposed. The fine must be paid within 14 days. And if they fail to pay, the penalty will be deducted from their accounts without notice, it added.

As the country's reserves are decreasing, there is a liquid dollar crisis in banks since last April. On 12 July, for the first time, the dollar was sold at Tk100 in the open market due to the low supply of cash dollars because of a decrease in the arrival of expatriates.

After that, the dollar price gradually increased to Tk120 on 10 August. After that, the Bangladesh Bank launched raids in the kerb market and exchange houses to prevent dollar manipulation.

The central bank issued show cause notices to 49 money changers for various irregularities in dollar trading and the licence of five more entities has been suspended.

In view of this, the treasure heads of six local and foreign banks were removed from their duties on 8 August for excessive profits. Although later it was withdrawn by the Bangladesh Bank.