Bangladesh 2.0: Recovering the loot
An effective strategy and actionable plan to recover black money, both locally and internationally, is the single most important mission and critical task for the popular interim government now.
The popular interim government in Bangladesh must urgently meet many clear and present challenges that threaten our collective aspiration for a better Bangladesh that her energetic, resilient, and courageous youth clearly deserve.
After 15 years of unilateral power, rampant corruption, and endemic cronyism under the deposed, exposed, and disgraced kleptocracy – the new government must ensure transparency and equal treatment under the law and engineer sustainable prosperity for all under difficult circumstances.
To that end, it must redesign and rebuild the apparatus of administrative service whilst restoring public confidence in the systematically ransacked financial sector in general, and the banking sector in particular.
Keeping that in mind, an effective strategy and actionable plan to recover black money, both locally as well as internationally, is the single most important mission and critical task that can effectively tackle the economic and banking crisis, and prevent the sabotage of our collective aspirations for a brighter future.
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The unprecedented scale of corruption and capital flight is staggering with estimates ranging from USD 100 to 150 billion of black money laundering. Global Financial Integrity (GFI), a Washington-based think tank that focuses on illicit financial flows, assumes Bangladesh loses USD 8.27 billion annually to trade mis-invoicing, a traditional mechanism for money laundering.
At a press conference on 28 August, Bangladesh Bank Governor Dr Ahsan H Mansur described the systematic capital flight executed by the S Alam Group was the largest bank heist in history with the group syphoning off up to USD 16.6 billion.
He stated that "I am unaware of anyone else globally who has looted banks on this scale" and he went on to warn people not to purchase any assets linked to the S Alam Group since the government is planning to seize those assets to compensate depositors in banks and NBFIs linked to the group.
Echoing the governor's findings, Salman F Rahman, the former private sector advisor to the unseated Prime Minister and arguably the most powerful functionary in the previous government, reportedly told interrogators that half of the USD 12.2 billion in looted money the S Alam Group has laundered overseas has gone to two family members of the deposed Prime Minister.
The process of seizing and repatriating the money looted with cavalier abandon, then criminally transferred and laundered overseas– is difficult and time-consuming, but not at all improbable as an existential matter of moral and economic prerogative and decency.
The interim government must expedite setting up an "Asset Recovery Task Force" headed by a Special Assistant to the Chief Advisor who has the authority to coordinate efforts from Bangladesh Bank (particularly Bangladesh Financial Intelligence Unit), the Anti-Corruption Commission, Police CID, and the Law Ministry with local and key international experts such as the United Nations Anti-Corruption and Asset Recovery Unit, the US Treasury and Justice Department, and their counterparts in destination target countries.
How do we get started?
Firstly, the taskforce must recruit experts with differentiated forensic accounting and banking investigation skills and insight. In addition to international government agencies and departments already mentioned, the taskforce must also deploy leading private sector financial fraud investigators such as Kroll and Associates. The investment is worth it to recover tens of billions, and such pre-eminent agencies can also be engaged on a success fee basis.
Secondly, it must on-board an experienced legal team to coordinate the necessary steps with the courts locally and internationally for asset seizure and recovery.
Lastly, the taskforce must generate strong political support and good will from major money laundering destination governments. On the latter point, the global credibility, network and good will of our Chief Advisor Professor Yunus is key.
The "US Asset Recovery Tools and Procedures: A practical Guide for International Cooperation" published by the US State Department and Justice Department states:
"We are also determined to protect our economy from the corrosive influence of foreign corruption by preventing corrupt leaders from investing stolen money or bribes in the United States or laundering these tainted funds through our financial system.
In furtherance of this objective, the Department of Justice (DOJ) launched the Kleptocracy Asset Recovery Initiative in 2010, staffed with dedicated attorneys tasked to investigate and prosecute cases to seize and forfeit the ill-gotten gains of corrupt foreign leaders and their cronies. These attorneys work with partners around the globe in the fight against corruption, and their recent accomplishments have been significant.
The report notes that there are 6 overarching steps in every country to recovering illegal proceeds either from corruption or crime in general:
1. Identifying the underlying crime and admissible evidence establishing the criminal conduct;
2. Identifying and locating assets subject to confiscation;
3. Demonstrating (through evidence) the link between the assets and the criminal conduct;
4. Seizing or freezing the assets;
5. Confiscating the assets; and
6. Repatriating and disposing of confiscated assets.
A 13 June US Justice Department press release noted that "The Justice Department announced today that it has repatriated an additional $156 million in misappropriated 1 Malaysia Development Berhad (1 MDB) funds to the people of Malaysia, bringing the total returned by the department to approximately USD 1.4 billion."
The report also noted that "According to court documents, the funds from 1MDB, formerly Malaysia's investment development fund, were laundered through major financial institutions worldwide, including in the United States, Switzerland, Singapore, and Luxembourg. As alleged in the civil forfeiture complaints, from 2009 through 2015, high-level officials of 1 MDB, their associates, and Low Taek Jho, also known as Jho Low, misappropriated more than USD 4.5 billion in funds belonging to 1MDB through a criminal scheme involving international money laundering and embezzlement. Some of the embezzlement proceeds were also allegedly used to pay bribes."
If the US Treasury can return USD 1.4 bn to Malaysia for 1 MDB over a six year period, it can surely do the same for Bangladesh where the loot is 15 to 20 times greater. The proposed Asset Recovery Taskforce in Bangladesh must be duly tasked with persuading its international partners to pursue the loot with aggressive intent and extreme prejudice.
Additionally and in parallel, the Asset Recovery Taskforce must work with all key stakeholders to establish a new legal framework to rapidly deal with asset seizures for local corruption. That amount is likely to be several multiples of international black money laundering.
Among other critical reconstruction projects, the locally and internationally recovered proceeds can also finance:
1. A "Bad Bank" to manage non-performing loans and restore health to our banking system;
2. A new sovereign wealth fund based on Singapore's Temasek that can finance new economic sectors with a focus on Green and Youth employment generating growth;
3. A new "Martyrs & Survivors Fund" that will compensate the families of the murdered and the injured in the 5 August Student Uprising.
Thankfully, the new government has abolished the morally unjust and functionally counterproductive "15% money whitening scheme" that ended-up penalising honest taxpayers and rewarding corruption.
The government may also consider an amnesty or reduced jail time depending on the circumstances, for example when 100% of the loot has been returned. The government may also consider developing an incentive to report black money where some financial compensation will be given for information that leads to successful asset recovery domestically and internationally – inspired by the successful US "Whistleblower" programmes.
Ifty Islam is the Chairman of Asian Tiger Capital Partners. Email: [email protected]
Disclaimer: This article was submitted to TBS on 3 September. The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard
