Unrecorded capital flow from Bangladesh stood $61.63 billion between 2005 and 2014, riding mostly on misinvoicing, according to a report of Global Financial Integrity.
The GFI report also revealed that illicit capital flight from Bangladesh was on a higher trend from 2007 following political turmoil of the time, and it continued until 2013 when the highest $9.66 billion was siphoned off.
Of the total $61.63 billion illicit capital flow, $56.83 billion was through trade misinvoicing while the rest $4.8 billion could not be traced in the balance of payments data, the report added.
The Washington-based research and advisory organisation unveiled the report, titled “Illicit Financial Flows (IFFs) to and from Developing Countries: 2005-2014”, on Monday.
Commenting on the report, former chief economist of Bangladesh Bank, Biru Paksha Paul, pointed out that under-invoicing in export and over-invoicing in import are the key drivers behind illicit capital flight.
If under-invoicing in export and over-invoicing in import can be controlled, around 50% illegal capital flight could be stopped, said Paul.
He also suggested increasing capacity of ports and adopting scientific monitoring to control misinvoicing.
Political uncertainty will have to be removed to prevent illicit capital flight, observed former finance adviser to a caretaker government AB Mirza Azizul Islam.
The government should ensure investment friendly atmosphere in the country so that people can make investment easily, he added.
A businessman, preferring not to be named, told the Dhaka Tribune that people usually send money illegally only for their safety.
With the change of political regimes, it brings trouble to politicians as well as businesses to some extent, he added.
“Illicit capital outflow from Bangladesh in 2014 is a little less compared to 2013, but there is no visible sign of improvement. It may be that due to better monitoring of the National Board of Revenue, Bangladesh Bank and law enforcement agencies, illegal capital flow has seen a slight fall,” noted AB Mirza Azizul Islam.
Bangladesh Bank Executive Director Subhankar Saha told the Dhaka Tribune: “I do not prefer to comment on the finding of GFI report as data used in the report are based on perception and not justified.”
The central bank is working with other commercial banks and law enforcement agencies to prevent illegal capital flight, he added.
An average of 87% of global illicit financial outflows over the 2005-2014 period were due to the fraudulent misinvoicing of trade, the GFI report showed.GFI President Raymond Baker said: “The combination of illicit outflows and inflows, arising from both balance of payments data and direction of trade statistics, leads to an estimate of IFFs at 14% to 24% of total developing country merchandise trade.” The GFI recommended a number of policy measures to curtail illicit flows that include increasing transparency in the global financial system and taking measures related to tax haven secrecy, anonymous companies, and money laundering techniques.