Policies, instrumentalities, compliance and control: combatting money laundering in Bangladesh
| DOI | https://doi.org/10.1108/JMLC-10-2021-0109 |
| Published date | 25 October 2021 |
| Date | 25 October 2021 |
| Pages | 189-204 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | Habib Zafarullah,Halima Haque |
Policies, instrumentalities,
compliance and control:
combatting money laundering
in Bangladesh
Habib Zafarullah
Department of Social and Philosophical Inquiry, University of New England,
Armidale, Australia, and
Halima Haque
Department of Public Administration, Jahangirnagar University, Savar, Bangladesh
Abstract
Purpose –Money laundering (ML) has become a global threat in recent years, impacting both developed
and poor countries. Developing an efficient anti-money laundering (AML) regime is a difficult and time-
consuming process owing to the ever-changing spectrum of methods used, weaknesses in control
mechanisms, intricacies of laws and regulations, organizational malfunction and goal displacement. In
Bangladesh, surge of illegal money, rising money heists and egregious capital outflows have posed a
governance problem. The purpose of this study is to investigate the dimensions of ML and examine the
structureand performance of the AML regime.
Design/methodology/approach –This study adoptsa qualitative method, based on a thorough review
of the conceptual and empirical literature on ML, content analysis of a range of publications, a scan of
newspaper articles and digital resources and responses/comments of current and retired government
employees in Bangladesh.The evaluation is informed by the recommendations of the Financial Action Task
Force and supportedby the mutual evaluation reports of the AGroup on Money Laundering.
Findings –Bangladesh, like most of South Asia, is highly vulnerable to ML and is hard-pressed to fully
comply with global standards for control. Weak institutions, bureaucratic pathology, lack of transparencyand
accountability, high levels of corruption, an ambiguous regulatory environment, unregulated financial
operations, a disordered banking sector, conflicting interests, criminal exploitation, poor oversight and reporting,
flawed risk assessment and weak government performance have affected the performance of the AML system.
Originality/value –This paper looks at the problem of ML from a holistic perspectivecovering different
dimensions such as black moneywhitening, illegal funds movements, informal money transfersystems, use
of offshore refuge for hiding moneyand so on and the state’s responses to the syndrome. The evaluationwill
be of particular relevance to policymakers, anti-corruption and law enforcement agencies, the financial
intelligenceoperators and public prosecutors dealing with criminaljustice.
Keywords Bangladesh, Money laundering, Black money, Financial Action Task Force,
Money Laundering Act 2012
Paper type Case study
1. Introduction
One of the unsettling offshoots of globalization is cross-border illicit financial flows (IFF).
Owing to global interconnectivity,the transfer of funds/capital from one country to another
for ulterior reasons, suchas tax evasion, money laundering (ML), drug trafficking, financial
fraudulence, market manipulation andcorruption by circumventing capital controls is now
viable (United Nations, 2016;IMF, 2021). While increased cross-border integration in the
Combatting
money
laundering in
Bangladesh
189
Journalof Money Laundering
Control
Vol.26 No. 1, 2023
pp. 189-204
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-10-2021-0109
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1368-5201.htm
digital economy helps governmentsand businesses enormously in terms of speed, flexibility
and creativity, it also raises security uncertainties (Vaithilingam et al., 2015). This
phenomenon foments transnationalcorruption as politically powerful individuals, generally
possessed of illegallyobtained money or in control of state finances or banking and business
enterprises, conceal, cleanseand transfer money and avoid sanctions often with the help of
unscrupulous public officials(Transparency International, 2019;Kyriakos-Saad et al.,2012;
Cooley and Sharman, 2017;Andreas, 2015).Countries with deficient control over corruption
are more likely to have lower levels of compliance with international AML regulations and
poor enforcement (Verdugo, 2011).Sometimes this laundering act is individualized, at times
concertedly organized.Whatever form it takes, it is corruption of the highestamplitude with
wide ramifications. IFF harm a country’s development objectives by depleting hard
currency reserves, raising inflation, reducing tax revenue, limiting investment, restricting
free trade, constraining poverty alleviation and complicating security issues (World Bank,
2014). For developing countries, this implies hundreds of millions of dollars in lost or
foregone tax income that could help promote a robust and sustainable economy, help create
jobs, reduce inequality,help the poor and act against climatechange (GFI, 2020,p.5).
In general, IFF worldwide is worth over trillions of dollars and inflict substantial
financial damage to a country’s economybecause of the inadequacy of resource distribution
and, consequently, inflatecosts for products and services (UIAF, 2014, p. 21). The estimated
amount of laundered currency in a single year range between $800bn, which is almost 2%
and $2tn or 5% of global gross domestic product (GDP) (Respeto, 2021). However, strict
bank secrecy laws in some nations makeit easier for criminals to conceal the source of illicit
payments. This has beena key facilitator in IFF (Blum et al., 1998).
As is well known, a familiar form that IFF takes is ML –a clandestine operation
challenging states and governments, which “areincreasingly besieged, out-smarted, poorly
equipped, clumsy, and even incompetent in dealing with this illicit side of globalization”
(Andreas, 2011, p. 404). Today, the illicit global economy is rife with both overt andcovert
launderers. National,regional and international efforts at combating the menace are copious
with nations homogenizing and harmonizing anti-laundering measures and creating
instruments for its control (Sharman, 2011). These make the act a tad harder to accomplish
but not entirely infallible in decommissioning launderers (Andreas, 2015). Offenders
continue their craft in a different guise, in differentstyles, in different settings unperturbed
by impeding factors. Global anti-crime governance embodies norms and frameworks that
energize international cooperation in taking launderers to task for non-compliance to
regulations (Jakobi, 2013;Cooley and Sharman, 2017). Anti-laundering campaigners,
including civil society organizations, national financial intelligence units and international
bodies, demand morestringent regulations to encumber offenders from operatingsmoothly.
However, creating an effective anti-money laundering (AML) regime in many countries,
especially the developing ones,is not an easy and manageable task because of the evolving
range of methods used, the flaws of control mechanisms, and to be more specific, “the
intricacy of the laws and regulations, the institutional complexity, and the multiplicity of
goals”(Levi and Reuter, 2006, p. 295). For developing countries, illegal cross-border money
transfers raise questionsabout the efficacy of governance, particularly the transparencyand
accountability of public institutions and the credibility of the AML regime. With different
economic structures than those in the advanced countries, unique contextualized AML
frameworks become indispensable (Sharman, 2011). The UN Convention Against
Corruption (UNCAC), which is the only legally enforceable universal anti-corruption
instrument in the world, provides for comprehensive solutions covering preventive
measures, criminalization and law enforcement, international cooperation and information
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