Laws whitening black money for boosting national economy. Prevention or legalisation of corruption in Bangladesh?
| DOI | https://doi.org/10.1108/JMLC-04-2013-0013 |
| Published date | 06 May 2014 |
| Date | 06 May 2014 |
| Pages | 141-165 |
| Author | S.M. Solaiman |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation |
Laws whitening black money for
boosting national economy
Prevention or legalisation of corruption in
Bangladesh?
S.M. Solaiman
Faculty of Law, University of Wollongong, Wollongong, Australia
Abstract
Purpose – The purpose of this article is to demonstrate that granting general amnesty to thousands of
black-money holders in Bangladesh has failed to make any positive impact on the development of its
securities market. Rather, such a move or mercy by the successive governments over the years has
basically increased corruption in the country.
Design/methodology/approach – The article relies on both primary and secondary materials. An
archival analysis of the materials has been carried out in this research.
Findings – The major ndings are that whitening black money is legally awed, morally indefensible
and economically unsound; the ultimate outcome of the whitening opportunity appears to be the
protection of corruption, the prevention of which is imperative for the sustainable development of the
national economy of Bangladesh; and no credible evidence has been found to support the underlying
assumption that this immunity offered over the past four decades has beneted the economy.
Originality/value – Its originality is evident in the analysis of the materials in a cohesive way to
prove a hypothesis that the immunity granted to the black-money holders has been a awed initiative
of the successive governments of Bangladesh to increase investment.
Keywords Bangladesh, Corruption, Investment, Black money
Paper type Research paper
1. Introduction
The successive governments of Bangladesh succumbed to the pressure of wrongdoers
for the privilege of legalising black money over the past four decades. The present
government has offered the disputed opportunity to the people again last year (Mala,
2012;The Daily Star, 2012c;2012d;2012e)[1]. This has been done despite the fact that the
National Board of Revenue (NBR), apparently an advocate of such a privilege, has
disclosed that no amount of black money has been invested in the securities market from
July to October 2011 availing of the last year’s amnesty (The Financial Express, 2011a).
Mysteriously, no information about how much black money has been whitened and by
whom since July 2011 has been made publicly available to date. Recently, following
persistent demonstrations of securities investors against a record fall of the market, the
government has offered a package of stimuli to investors (for details see Islam, 2011;
Chowdhury, 2011a). One of those stimuli has widened the scope of amnesty to the people
holding black money by providing a guarantee that no questions about the source of the
money will be asked, if the money is investment in the securities market (The Financial
Express, 2011b;Byron, 2011)[2]. Nonetheless, the market remains moribund (The
Financial Express, 2011c;Bakht, 2011).
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1368-5201.htm
Laws whitening
black money
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Journal of Money Laundering Control
Vol. 17 No. 2, 2014
pp. 141-165
© Emerald Group Publishing Limited
1368-5201
DOI 10.1108/JMLC-04-2013-0013
Successive governments since 1976 have been offering an “illegal and unethical”
opportunity to “offenders” (The Daily Janakantha, 2011a)[3] who are holders of huge
amounts of undisclosed money accumulated generally by offensive means. The
privilege allows legalisation of their ill-gotten money in exchange for a nominal tax and
investment in potentially protable sectors in the country. This opportunity has been
harshly criticised by almost all politicians, economists, lawyers, business leaders,
foreign donors, Transparency International Bangladesh (TIB), the National Human
Rights Commission (NHRC) and the Anti-Corruption Commission (ACC) of the country
alike in an identical tone (see The Daily Star, 2005b;2012d;Haque, 2009;Byron, 2009).
They describe this leniency as being an illegal and immoral act of the government,
injustice and unfair treatment for honest taxpayers, encouragement and protection of
corruption and ultimately harmful for the stability of the securities market and its bona
de investors. Paradoxically, the politicians, who are seriously critical of this
forbearance when they are in opposition, make fresh offers of the same amnesty to the
“offenders” when they are in power. Thus, all governments, regardless of their political
ideologies and pre-election promises, have been allowing whitening of black money by
investing in various sectors, including the securities market. They are therefore
nurturing the “wrongdoers” apparently on the premise of improving the national
economy of Bangladesh. However, empirical data suggest that only a small amount of
black money is invested in securities every year and all the black money obtains
legitimacy. Hence, this practice extensively contributes to encouraging corruption and
discouraging honesty in the country. On the other hand, the inquiry into the latest share
scam occurred early 2011 (The Inquiry Report, 2011)[4], which left the share market
moribund (see Ahmed, 2011;The Daily Janakantha, 2011b), suggests that the black
money played a pivotal role in that boom and bust (Chowdhury, 2011b;Ahmed, 2011).
This nding is reinforced by the unusual bullish trend of the market following this
amnesty declared on 29 June 2011 (The Daily Star, 2011a). The market response to this
amnesty is so unreasonable that the Finance Minister has publicly expressed his dismay
over the hasty rise in share prices by stating that
[t]his surge in prices is not welcome. It is not a good sign. […] Some old players were sitting idle
and now they are investing money in the market to raise the prices with an ill motive. […] no
new investors have come to the market (The Financial Express, 2011)[5].
This article aims to critically examine the reasons for the adoption such a poor policy by
the successive governments in Bangladesh and its implications for investment and
corruption in the country. It concludes that corrupt politicians and government ofcials,
rather than the economy, are beneted the most from this awed policy. It provides
specic suggestions on how to effectively deal with black money in Bangladesh, which
can be guidelines for other countries facing the same problem.
2. Background of whitening black money in Bangladesh – history of
double standards
“Black money is black and I wonder how could that be whitened? There’s no way to
amass black money without corruption”, said the incumbent Prime Minister of
Bangladesh, just a couple of months before taking oath of her current position for her
second term (The Daily Star, 2008a)[6]. The longest serving Finance Minster of the
country, an auditor by profession, who offered the whitening privilege on several
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