Recovering laundered money: Taskforce proposes 'reward' strategy

The taskforce for bringing back laundered money has proposed rewards for public officials who aid in money repatriation efforts with commission taken from the recovered funds.

The taskforce, led by the attorney general, at a meeting on 17 April instructed the Bangladesh Financial Intelligence Unit to amend the relevant laws and present it to the taskforce meeting in June for  awarding commission based on recovered money.

The commission will be offered in accordance with the provisions outlined in the Income Tax and Customs Acts. Besides, the taskforce instructed the Financial Intelligence Unit to incorporate relevant sections into the Money Laundering Act 2012. 

"Simply awarding commission to officials does not guarantee recovery of laundered money. The government must ensure a protective environment where officials face no repercussions for conducting thorough investigations against influential money launderers"

— Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue

Officials from the Anti-Corruption Commission, National Board of Revenue, Bangladesh Financial Intelligence Unit, and Criminal Investigation Department are usually involved in identifying, investigating, and prosecuting cases to recover laundered money. 

Officials from these government agencies will receive a commission once the assets are recovered, according to sources. However, they said the rate of the commission had not been determined yet.

Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue, told TBS that simply awarding commission to officials does not guarantee recovery of laundered money.

The affluent are engaging in laundering money, he said. "They must be brought within the purview of the law to reduce capital flight and to empower officials to conduct proper investigations."

Rahman said the government must ensure a protective environment where officials face no repercussions for conducting thorough investigations against influential money launderers.

Iftekharuzzaman, executive director of Transparency International Bangladesh, told TBS that such provisions are not unusual in relevant international good practices, and hence should be generally welcomed. 

However, he said these may be effective only if strategically designed, especially if conditional upon concrete delivery at rates of rewards determined based on measurable performance indicators. 

"Otherwise, these may turn out to be undeserving bonuses and another means of wastage of public money," he added.

Iftekharuzzaman further mentioned that incentives like this are effective only when part of a comprehensive package of rewards for good job and punishments for underperformance, especially unjustified and habitual.

Second significant effort to recover laundered money

The initiative marks the second significant attempt to tackle the issue, following the government's FY23 policy that allowed individuals to repatriate illicitly transferred funds at a flat tax rate of 7%. 

The policy allowed holders of undisclosed assets to declare their overseas immovable properties in their tax returns by paying a rate significantly lower than that imposed on honest taxpayers, who faced a top tax rate of 25% in the same fiscal year. 

Despite these lenient terms, the policy failed to recover any funds, as not a single taka was brought back, according to sources at the revenue authority. 

Regarding the commission for officials, Attorney General Abu Mohammad Amin Uddin on Thursday told The Business Standard that legal amendments are necessary, and the law ministry is working on it. 

"We make decisions on identifying and recovering laundered assets," he added.

Networking to recover money

According to minutes of the meeting, the foreign ministry has sent draft agreements to 10 countries for collecting necessary information, evidence, and legal support to recover laundered money. 

These countries include Canada, the UK, the US, Singapore, Australia, Malaysia, the UAE, Switzerland, Thailand, and Hong Kong-China, where it is believed that the most money has been laundered by Bangladeshis.

In response, Australia requested additional information and sent a letter to Bangladesh, after receiving the draft agreement from Bangladesh. 

Hong Kong authorities sent three draft agreements to Bangladesh, which are currently being reviewed by the Public Security Division of the home ministry.

The attorney general instructed the foreign ministry to regularly communicate with the governments of the countries where draft agreements have been sent, using Bangladeshi missions to follow up.

When asked about the progress of signing an agreement with 10 countries to recover money, the attorney general declined to comment. He said the BFIU performs the task force's secretarial duties and they may have the information.

At the taskforce meeting, a representative from the Anti-Corruption Commission said the commission recently joined an international forum called GlobE Network for mutual assistance in recovering laundered money. 

Besides, the taskforce decided that the Public Security Division should join the Asset Recovery Interagency Network Asia Pacific (ARIN-AP), and the National Board of Revenue should join the GlobE Network and the Global Forum on Transparency and Exchange of Information for Tax Purposes.

Meanwhile, during the prime minister's recent visit to Thailand, discussions were held about signing an agreement with the Thai government. 

A report by the EU Tax Observatory, an independent research institute, revealed that in 2022, there were 394 Bangladeshis who purchased or intended to purchase properties in Dubai. These individuals bought a total of $225.3 million worth of property, acquiring 641 assets.

Challenges in recovery

A representative from the Customs Intelligence and Investigation Directorate said trade-based money laundering investigations often reveal discrepancies between declared and actual imported goods. 

The official said they face challenges in verifying foreign exporters' information. "It would be helpful if Bangladeshi embassies in relevant countries could provide accurate information about the exporters."

In December, a report by the Financial Intelligence Unit said the absence of a competitive pricing database for import-export goods makes it nearly impossible to prevent money laundering through foreign trade. 

The report further said those accused of laundering money through fraudulent loans, in collusion with bank and financial institution officials, are highly influential. 

They often hire top lawyers and use various tactics to delay legal proceedings which can lead to frustration in the investigation and prosecution process. 

The report highlighted that the most common methods of money laundering are through over-invoicing and under-invoicing. 

Due to the absence of value-added tax on exports and zero duty rates on imports of some goods, customs officials are less attentive to export shipment verification. 

It also mentioned that many government officials and businesspeople launder money under the guise of paying for their children's education abroad using it to buy houses and cars overseas.

The report said state lawyers often lack expertise in handling such cases and there is a lack of skilled personnel to investigate and prosecute these cases effectively.

Little success in recovery 

According to Washington-based Global Financial Integrity, around Tk74,000 crore is laundered from Bangladesh each year with minimal success from the government in recovering these funds.

For the first time in Bangladesh, the government last fiscal year introduced a 7% tax incentive to repatriate laundered money. However, not a single launderer repatriated money throughout the year.

In contrast, the US collected $6.5 billion in taxes, penalties, and interest from 45,000 taxpayers through its Offshore Voluntary Disclosure Program since 2009.

France has collected €1.2 billion and Italy €570 million in unpaid taxes and penalties from taxpayers with secret Swiss bank accounts. Similarly, the UK recovered £150 million and Spain €210 million.

Germany, using information purchased from a whistleblower about secret Swiss and Liechtenstein bank accounts, recovered €1.6 billion in taxes in 2010.