Officials of the financial intelligence unit (BFUI) under the central bank is likely to visit Malaysia, Singapore, Canada and other developed countries where many politicians and businessmen send money illegally from Bangladesh through different informal channels, including hundi.
Different estimates by the bankers suggest that hundi is being used to facilitate transactions of over $250m annually.
Bangladesh Bank officials attending yesterday’s meeting of the Parliamentary Standing Committee on the Finance Ministry said it was difficult to stop hundi, which is considered one of the ways of money laundering and money transfer from overseas, as the Anti-Money Laundering Act, 2012 and other related laws lack proper definition for hundi.
The central bank governor, Atiur Rahman, and other officials working to stop illegal money transfers from Bangladesh said the Act could not completely stop money laundering because of a lack of coordination among the 25 government agencies tasked to implement the comprehensive law.
The Act has referred to hundi as a way of money laundering – an illicit way of making legal the illegally-earned money in the financial system on the pretext of investment and business.
The central bank set up the Bangladesh Financial Intelligence Unit in line with a section of the Act.
But the tough law has no definition for hundi, which is very popular among the common people for quick handovers of funds, and with better exchange rates.
“Many of the businessmen, politicians and industrialists have been maintaining offices in Singapore, Malaysia and other countries. They have pumped the money out of Bangladesh, but not through banking channels; it was mainly done through hundi,” Abdur Razzaq, the standing committee chairman, told the Dhaka Tribune after yesterday’s meeting.
Earlier, the government enacted the Money Laundering Prevention Act in 2002, the UN convention Against Corruption in 2007 and promulgated the Anti-Money Laundering Prevention Ordinance in 2008.
Huge numbers of people had set up business establishments and bought houses in eight to 10 countries including Singapore, Malaysia, Canada, Dubai, the US and Switzerland.
“They [BFIU] have agreed to go abroad and mark some of the big fish maintaining businesses and houses abroad,” said the chairman.
One official of the BFIU told the meeting that a building in Chittagong was commonly known as “hundi building,” but no action could be taken due to a lack of coordination between the government agencies.
Hundi is very common among the expatriates who send their remittances back home. Thus, the money comes to Bangladesh, bypassing the banking channel that collects charges for money transfers and deposits to the public exchequer. Again, hundi deprives Bangladesh of foreign currencies as receivers get local currency.
The risk of hundi is that the money can easily go to the wrong hands for terrorism and other subversive activities.
In its special report on money laundering prepared for yesterday’s meeting, the Banking Division under the Finance Ministry stated that under-invoicing, over-invoicing and hundi are increasingly being used as tools to launder money from Bangladesh even though the Foreign Currency Regulation Act contains many restrictive measures.
“Despite putting in place many mechanisms, hundi cannot be stopped as the laws have not defined hundi,” says the report, which was obtained by the Dhaka Tribune.
But experts disagree.
Economist Zayed Bakht does not think defining hundi could stop such a practice.
“Basically, we have kept the exchange rates higher. This is why hundi is so popular. We have to think about that as far as reducing hundi is concerned,” he told the Dhaka Tribune.
