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The path to recovering our stolen assets
Corruption, embezzlement, and money laundering have been endemic in Bangladesh but reached new heights during the last 15 years of the now-toppled regime led by the Awami League. The recently published “White Paper on the State of the Bangladesh Economy” reported that $234 billion was syphoned off from Bangladesh between 2009 and 2023. The interim government has promised to work tirelessly to identify the perpetrators of this massive mayhem—to loot and plunder the country and its poor people—and bring back some of the ill-gotten resources.
Tax havens around the globe, particularly in the Middle East, Malaysia, the UK, Canada, the US, Hong Kong, Malaysia, and Singapore, provided a golden opportunity for businesses, bureaucrats, and politicians to use a well-crafted system of patronage and crony capitalism to take advantage of the country’s incompetent leaders and financial regulators to launder an average of $16 billion a year.
The White Paper documented the mechanism used for money laundering (ML)—these tricks have been well-known for a long time. The then foreign minister of Bangladesh stated during an interview with The Daily Star in 2020 that the AL government had information that politicians, businessmen, and government officials, including some “serving officials,” had pilfered and whitewashed money by buying properties in Canada. It is no secret that Bangladesh Bank and the Bangladesh Financial Intelligence Unit (BFIU) were fully aware of the scale of ML and the role played by the key protagonists!
The previous government was, on many occasions, alerted by the World Bank, multilateral financial institutions, UN agencies, and national watchdogs about the scope of illicit financial flows (IIF). In 2011, during negotiations with the World Bank to secure financing for the Padma Bridge, the bank provided “credible evidence of corruption” to the government. These were brushed aside and dismissed as “trumped-up” allegations by the former prime minister.
In my brief discussion on this matter with members of the current administration, it is clear that money laundering and its prevention are among its highest priorities. Last week, the BB governor publicly reiterated his intention to bring back stolen assets from other countries. He chairs a nine-member taskforce with representatives from important state agencies, which has been assigned to track down stolen assets abroad and support investigations aimed at their recovery. The taskforce seeks to expedite legal proceedings for asset recovery, identify and address barriers to recovery, manage frozen or recovered assets abroad, and strengthen communication with relevant domestic and international bodies to gather essential information while enhancing internal coordination and capabilities.
While asset recovery is a tough and time-consuming process, it needs to be done, and for many reasons. The money looted from the coffers is now being used to undermine the present government. If we reverse the resource outflow and turn back the tide, that would rejuvenate our economic development. For example, the ML activities of the owners of the S Alam Group have resulted in the bankruptcy of the various businesses they own. If their overseas resources are liquidated and the proceeds repatriated and invested in their domestic enterprises, the local economy will receive a shot in the arm.
Also, we need to send a message to the culprits. In the language of criminal justice system, the purpose would be “deterrence, retribution, and restoration.”
The asset recovery stage encompasses several steps that need to be pursued diligently. To begin, a special sub-unit comprising legal and financial experts could freeze, without delay and much fanfare, the funds or other assets of designated persons or entities. Fortunately, Bangladesh can leverage the goodwill earned by the interim administration and seek assistance from three powerful international bodies: i) The World Bank’s Stolen Asset Recovery Initiative (STAR); ii) The Financial Action Task Force (FATF), based in Paris; and iii) The US Department of Justice’s Money Laundering and Asset recovery Section (MLARS).
Going forward, the taskforce must initiate and hire staff to undertake and strengthen legal action in the following areas: identifying stolen assets, including non-performing bank loans; collecting intelligence and evidence and tracing overseas assets; determining the beneficiaries of ML and ownership transparency; initiating international cooperation between involved jurisdictions; coordination between agencies participating in the taskforce; and legal actions, domestic and international.
Why is international collaboration so important? Most of the stolen money is invested overseas or stashed away in foreign banks. The process of identifying these investments and recovering them will be slow and involve tackling the lawyers, trust experts, real estate agents, accountants, and financial institutions representing the individuals—the Saifuzzamans and the Benazirs—who might have already been identified and tipped in advance. The money, once taken out of the country, is most likely to have been invested in real estate or businesses through a process known as “layering,” where the ownership is completely fuzzy. We need to hire the best global investigators to trace the money since the beneficial owner may be hidden behind multiple layers of shell companies or a nominee company director.
Since the US, Canada, Singapore, and the UK have some of the strictest anti-money-laundering (AML) legislation and enforcement mechanisms, our embassies or high commissions in these countries must be notified of the business entities or persons of interest. Several newspaper accounts of Bangladeshi residents in Singapore, New York, Toronto, and London have surfaced over the last few years. The taskforce can forward the list of suspects to MLARS and target the three most corrupt sectors identified by the White Paper: financial, ICT, and power.
The ultimate goal of the current administration is to lay the foundation of an anti-ML programme that will prevent future occurrences. A comprehensive ML programme will include investment in employee education, stricter internal controls, accountability, and early detection.
We need to build stronger defences against corruption, money laundering, and fraudulent trading practices. Key sectors like banking should have guardrails against the “bad influence of party politics,” to quote Dr Wahiduddin Mahmud. Various policy measures and actions recommended by the Farashuddin Commission, set up after the Bangladesh Bank heist, need to be implemented. A whistleblower programme to reward individuals who provide helpful information on illegal financial activities must be established.
Finally, this most recent money laundering and kleptocracy saga underscores the pressing need for unwavering diligence and proactive implementation of a comprehensive AML compliance framework in Bangladesh to safeguard the financial system.
Dr Abdullah Shibli is an economist and works for Change Healthcare, Inc., an information technology company. He also serves as senior research fellow at the US-based International Sustainable Development Institute (ISDI).