$81.74b siphoned in 11 years from Bangladesh

[Black_cats]

$81.74b siphoned in 11 years from Bangladesh
Jasim Uddin | Published: 00:00, Jan 29,2019 | Updated: 01:07, Jan 29,2019

http://www.newagebd.net/article/63160/8174b-siphoned-in-11-years-from-bangladesh

Illicit capital outflow goes unabated as $5.9 billion (about Tk 50,000 crore) was siphoned off from Bangladesh in 2015 taking to $81.74 billion the amount siphoned off the country in 11 years since 2005, revealed the latest study of a global research organisation.

Washington-based Global Financial Integrity released the report of the study ‘Illicit Financial Flows to and from 148 Developing Countries: 2006-2015’ on Monday.

It estimated that illicit financial outflow or money laundering from Bangladesh was ranging from $2.7 billion to $5.9 billion in 2015 and the amount drained out through over-invoicing in import and under-invoicing in export.

The amount of money laundering in 2015 was a partial account as the research body made the estimation considering Bangladesh’s trades only with advanced economies.

In its previous report released in May 2017, the research body estimated Bangladesh’s illicit financial outflow at $75.84 billion at the maximum and $53.54 billion at the minimum between 2005 and 2014.

The organisation also estimated illicit financial inflows into the country ranging from $2.4 billion to $2.8 billion in 2015 which took place through under-invoicing in import and over-invoicing in export.
The organisation estimated the illicit financial outflows and inflows using two datasets of International Monetary Fund’s direction of trade statistics and United Nations’ International Trade Statistics (Comtrade).

According to estimates based on direction of trade statistics, 17.5 per cent of Bangladesh’s total trade worth $33.7 billion with advanced economies was laundered in 2015 while Comptrade-based estimates showed that 7.2 per cent of the trade value was drained out from the country.

The study put Bangladesh on the list of top 30 countries ranked by value of both illicit outflows and inflows.

The highest $222 billion was drained out from China in 2015 followed by Mexico $42.9 billion and Malaysia $33.7 billion.
A total of $9.8 billion siphoned off from neighbouring India in 2015.

Global Financial Integrity defines illicit financial flows as ‘money that is illegally earned, used or moved and which crosses an international border.’

The report is the latest of Global Financial Integrity’s series of reports on illicit financial flows.

In the previous report released in May 2017, the research body estimated illicit financial outflows from Bangladesh ranging from $6.06 billion to $8.97 billion in 2014, calculated based on the total international trade of the country worth $70 billion in the year.

The latest study says that trade-related illicit financial flows appear to be both significant and persistent features of developing countries’ trade with advanced economies.

As such, trade misinvoicing remains an obstacle to achieving sustainable and equitable growth in the developing world, it says.

In 2015, the amount of illicit financial flows from developing countries was $1,935 billion or 28.5 per cent of total trade worth $6,742 billion with advanced economies.
Some $807 billion of the amount was drained out from the countries.

Economist and experts said that overall trend of money laundering from Bangladesh remained a major concern as the country was put on the list the top 30 countries of illicit outflows.

Former Bangladesh Bank governor Salehuddin Ahmed told New Age on Monday that the trend of money laundering would not decline unless corruption was prevented.

Source of illegal money should also be checked as no one launders their legally earned money, he said.

The central bank and customs authorities are responsible for checking illicit capital flows through import and export process and it is possible to detect the incidences if both the agencies become vigilant over potential over-invoicing in import or other misinvoicing, he said.

He suggested that a special law on prevention of serious financial frauds and crimes should be enacted and a competent agency should be created to deal with the issues.

The Anti-Corruption Commission and the existing regulations are not capable of checking money laundering, he added.
Analysing the report, Centre for Policy Dialogue senior research fellow Towfiqul Islam Khan found that the trend of money laundering from Bangladesh was not declining as the country was put on the list of top 30 of the 148 countries for illicit financial flows in 2015.

This year, the estimates have also been done only on partial trade volume of the country as the research body has considered trade volume with advanced economies only, he said.

Regarding illicit inflows, he said that traders could take the scope of illicit inflows to evade tax and move the money earned through illegal ways, including smuggling and trafficking.

They can also adopt over-invoicing in export to get higher cash incentives given by the government on export, he added.
He said that the government should take initiatives for both institutional and legal reforms to curb illicit financial flows.

The government can also ally with similar economies to push the advanced economies to take stern position against illicit financial flows, he added.

 

[nahtanbob]

how do you compute illicit capital flow ? what is the definition and methodology here ?

 

[bluesky]

how do you compute illicit capital flow ? what is the definition and methodology here ?

I have no idea what procedure is there to compute the flow of money by the international watchdog. However, I can say a few words about sending money abroad. Bangladesh Bank does not allow a direct remittance.

So, one possible scenario may be like this. An American company (A) imports a 100 dollar worth of goods from a Bangladesh company (B). (B) asks (A) to open a Letter of Credit (L/C) worth 95 dollars and the remaining 5 dollars (B) receives in his/her account in a Bank in the USA or some other outside of Bangladesh.

Another possibility is the opposite of the one written above. (B) is an importing company and asks (A) to over-invoice the price of a certain consignment to, say, 105 dollars instead of $100. (B) receives the excess 5 dollars in an account outside of the country.

Yet, another possibility is sending money by Hundi from the country. (B) earns a big profit, manages to pay little or no tax and asks (C), the Hundi guy, to remit money to a Bank a/c out of the country. (C) sends the money from Singapore or Dubai where he keeps on pooling dollar money by purchasing it from the BD people (D) who work abroad. (C) and his associates pay back the money to the families of (D) in Bangladesh Taka.

 

[Nilgiri]

how do you compute illicit capital flow ? what is the definition and methodology here ?

Can only estimate it. It's done by sampling accounting "norms" of various traded goods/services.

This is how they got 222 billion "laundered" for China in just one year (2015)....because it is well established phenomenon there to create offshore holding companies that basically do the under/over invoicing on somewhat industrial scale.

This is also why there are discrepancies in some of comtrade data if you simply switch the flow direction around (say between Country A and B) for the same year.

 

[nahtanbob]

I have no idea what procedure is there to compute the flow of money by the international watchdog. However, I can say a few words about sending money abroad. Bangladesh Bank does not allow a direct remittance.

So, one possible scenario may be like this. An American company (A) imports a 100 dollar worth of goods from a Bangladesh company (B). (B) asks (A) to open a Letter of Credit (L/C) worth 95 dollars and the remaining 5 dollars (B) receives in his/her account in a Bank in the USA or some other outside of Bangladesh.

Another possibility is the opposite of the one written above. (B) is an importing company and asks (A) to over-invoice the price of a certain consignment to, say, 105 dollars instead of $100. (B) receives the excess 5 dollars in an account outside of the country.

Yet, another possibility is sending money by Hundi from the country. (B) earns a big profit, manages to pay little or no tax and asks (C), the Hundi guy, to remit money to a Bank a/c out of the country. (C) sends the money from Singapore or Dubai where he keeps on pooling dollar money by purchasing it from the BD people (D) who work abroad. (C) and his associates pay back the money to the families of (D) in Bangladesh Taka.

I understand the means by which people in a closed economy might send money abroad.

But how do you estimate the amounts ?? it looks to me like an inexact science.

I can give a couple of examples ...

Let us say my dad was a textile factory owner in bangladesh and played this invoice game to accumulate $2 million. Then I emigrate to the West and became a US citizen and inherits the $2 million. At this point the outflow is not illicit.

Or let us say I decide to spend the $2 million on wine and women. The bank account is exhausted and I return to bangladesh. the amount does not exist.

Can only estimate it. It's done by sampling accounting "norms" of various traded goods/services.

This is how they got 222 billion "laundered" for China in just one year (2015)....because it is well established phenomenon there to create offshore holding companies that basically do the under/over invoicing on somewhat industrial scale.

This is also why there are discrepancies in some of comtrade data if you simply switch the flow direction around (say between Country A and B) for the same year.

that is terribly inexact science because its assumes the finance guys can keep track of latest pricing trends in an industry

 

[Nilgiri]

I have no idea what procedure is there to compute the flow of money by the international watchdog. However, I can say a few words about sending money abroad. Bangladesh Bank does not allow a direct remittance.

So, one possible scenario may be like this. An American company (A) imports a 100 dollar worth of goods from a Bangladesh company (B). (B) asks (A) to open a Letter of Credit (L/C) worth 95 dollars and the remaining 5 dollars (B) receives in his/her account in a Bank in the USA or some other outside of Bangladesh.

Another possibility is the opposite of the one written above. (B) is an importing company and asks (A) to over-invoice the price of a certain consignment to, say, 105 dollars instead of $100. (B) receives the excess 5 dollars in an account outside of the country.

Yet, another possibility is sending money by Hundi from the country. (B) earns a big profit, manages to pay little or no tax and asks (C), the Hundi guy, to remit money to a Bank a/c out of the country. (C) sends the money from Singapore or Dubai where he keeps on pooling dollar money by purchasing it from the BD people (D) who work abroad. (C) and his associates pay back the money to the families of (D) in Bangladesh Taka.

The relative scale for BD is ridiculous if this estimate is true. Nearly 6 billion USD in just one year. India is around 10 billion for same year (2015)...but does like 12 times the total trade but less than twice the laundering as BD. BD laundering intensity is essentially more than 6 times worse than India. That is lost revenue in the end for BD govt...and also generates more black money that stays hidden from formal private sector/GDP too.

 

[nahtanbob]

The relative scale for BD is ridiculous if this estimate is true. Nearly 6 billion USD in just one year. India is around 10 billion for same year (2015)...but does like 12 times the total trade but less than twice the laundering as BD. BD laundering intensity is essentially more than 6 times worse than India. That is lost revenue in the end for BD govt...and also generates more black money that stays hidden from formal private sector/GDP too.

the figures in the original article is a lot of money for economy of the size of bangladesh

 

[Nilgiri]

that is terribly inexact science because its assumes the finance guys can keep track of latest pricing trends in an industry

Hence its an estimate that is backdated by about 3 years time (so there is more data chains in the interim to help with the estimate). Its not a real time estimate....situation right now can only be estimated say in 2022 etc.

the figures in the original article is a lot of money for economy of the size of bangladesh

Yes it is, especially at this early stage of BD economic development. Every billion dollars kept away from formal routes, is another billion dollars that BD govt basically has to take as a loan or increase leverage on the formal GDP of BD....which is a severe opportunity cost imposed on the larger economy.

 

[Black_cats]

I have no idea what procedure is there to compute the flow of money by the international watchdog. However, I can say a few words about sending money abroad. Bangladesh Bank does not allow a direct remittance.

So, one possible scenario may be like this. An American company (A) imports a 100 dollar worth of goods from a Bangladesh company (B). (B) asks (A) to open a Letter of Credit (L/C) worth 95 dollars and the remaining 5 dollars (B) receives in his/her account in a Bank in the USA or some other outside of Bangladesh.

Another possibility is the opposite of the one written above. (B) is an importing company and asks (A) to over-invoice the price of a certain consignment to, say, 105 dollars instead of $100. (B) receives the excess 5 dollars in an account outside of the country.

Yet, another possibility is sending money by Hundi from the country. (B) earns a big profit, manages to pay little or no tax and asks (C), the Hundi guy, to remit money to a Bank a/c out of the country. (C) sends the money from Singapore or Dubai where he keeps on pooling dollar money by purchasing it from the BD people (D) who work abroad. (C) and his associates pay back the money to the families of (D) in Bangladesh Taka.

You have not included the major part how money laundering happened in big way recently.

People opened LC to import heavy machinery or other products with big amount. Instead of getting the product they just asked their bank to release the money. As there are no coordination between Bangladesh bank and customs no flag was raised whether product was actually received or not. Bank also released as they only intervene if any dispute occurs and it is raised by customer.

There is an unusual rise of import bill in recent years. The above explained why it may be the case.

 

[Bilal9]

the figures in the original article is a lot of money for economy of the size of bangladesh

You will be amazed if you saw the lifestyle of some folks in Bangladesh, even in terms of American money (driving around in Lamborghinis and supercars fit for Beverly hills and downing 150 year old liquor worth $1500 in one sitting). You can fleece and cheat money out of poor people quite easily and the latter abound in Bangladesh...

The saving grace (maybe) is that these people are locals and they, having tasted the taste of illicit proceeds so easy, won't go anywhere else and may someday invest some of this locally in some business venture. The funds are siphoned overseas to Safe Haven Tax shelters in S'pore, The Caribbean or Switzerland usually, because keeping money locally is risky, as it can be confiscated at the whim of some new dictator. India being a red tape economy, has extremely tight controls, and such things are hard to do there.

 

[Nilgiri]

India being a red tape economy,

LOL a Bangladeshi saying this is hillarious:

https://en.wikipedia.org/wiki/Ease_of_doing_business_index#Ranking

Oh wait its the same idiot that doesn't know rudimentary basics on just about anything.

"Pass muh bengali test if you wanna prove yer Bengali"

BTW, Good job being less red-tapey than East Timor, Chad and Haiti

 

[bluesky]

5.9b flows out from BD in 2015: GFI
Asjadul Kibria | Published: January 28, 2019 22:59:01 | Updated: January 29, 2019 10:16:41

At least US$ 5.90 billion flew out from Bangladesh illicitly in 2015 through misinvoicing in international trade with the advanced economies.

The amount is closer to around two months' merchandise export of the country.

Washington-based Global Financial Integrity (GFI), in its latest report on illicit financial flows to and from the developing countries, unveiled the data on Monday.

It also showed that illicit financial inflows from other countries to Bangladesh stood at $2.8 billion in 2015.

Though titled as 'Illicit Financial Flows to and from 148 Developing Countries: 2006-2015', the report does not provide country-wise statistics of illicit financial outflows for the mentioned 10-year period.

The earlier report, released in 2017, showed that annual average illicit capital outflow from Bangladesh stood at $7.58 billion during 2005-2014, and the amount was $9.10 billion in 2014.

But the previous report estimated both trade misinvoicing and hot money outflow, as GFI's measure of illicit financial flows stems from two sources. One is the deliberate misinvoicing in merchandise trade, and another is leakages in the balance of payments or hot money flows.

The latest report only focused on trade misinvoicing and trade with the developed nations. Around 90 per cent of Bangladesh's export trade takes place with the advanced economies, while around 70 per cent of import trade with the developing countries.

Thus, the actual outflow through the trade misinvoicing may be higher than the amount mentioned in the report.

The country's merchandise trade with the rest of the world stood at around $75.0 billion in 2015, according to the Bangladesh Bank (BB) and the Export Promotion Bureau (EPB) data.

Moreover, the total illicit outflow would be much higher, if the hot money outflow is taken into consideration.

GFI estimate is based on the International Monetary Fund's (IMF) Direction of Trade Statistics dataset.

It also uses Comtrade dataset from the United Nations, which showed that the outflow of illicit fund from Bangladesh through trade misinvoicing stood at $2.70 billion - a conservative estimation due to lack of complete trade data.

According to GFI, trade misinvoicing is accomplished by misstating the value or volume of an export or import consignment on a customs invoice.

"Trade misinvoicing is a form of trade-based money laundering, made possible by the fact that trading partners write their own trade documents, or arrange to have the documents prepared in a third country (typically a tax haven), a method known as re-invoicing," it explained.

"Fraudulent manipulation of the price, quantity, or quality of a good or service on an invoice allows criminals, corrupt government officials, and commercial tax evaders to shift vast amounts of money across international borders quickly, easily, and almost in an undetected way," it added.

GFI also said illicit outflows of all the developing countries stood at around $600 billion in 2015.

South Africa is on top of the list of illicit outflow ($10.2 billion) in 2015. The amount for India is estimated at $9.8 billion.

https://thefinancialexpress.com.bd/economy/bangladesh/59b-flows-out-from-bd-in-2015-gfi-1548694839

 

[doorstar]

LOL a Bangladeshi saying this is hillarious:

https://en.wikipedia.org/wiki/Ease_of_doing_business_index#Ranking

Oh wait its the same idiot that doesn't know rudimentary basics on just about anything.

"Pass muh bengali test if you wanna prove yer Bengali"

BTW, Good job being less red-tapey than East Timor, Chad and Haiti

How do overseas and Indian owners of sweatshops in swampland take their profits home. Also how do the Indians hired for managing bongle affairs send their salaries back to India?

 

[Nilgiri]

How do overseas and Indian owners of sweatshops in swampland take their profits home. Also how do the Indians hired for managing bongle affairs send their salaries back to India?

Well I am assuming it can be done through these trade laundering (service related) avenues if you know the right people that know the right people etc. Heck wouldn't take much to launder it through over-under invoicing with Chinese shell companies for example...given China is another major trade partner of BD and has much larger infra to do this kind of thing (apparently estimated 222 billion laundered for China's trade with the world).

Total trade of BD in 2015 = 35 + 21 billion USD = 56 billion USD

Unaccounted 6 billion in 2015 would take it to 62 billion. 6/62 = 10% approx. @bluesky @Mage

Approx 1 in every 10 dollars traded to/from BD was illicit just that year.

Compare to India where it was 10/931 = 1% approx. 1 in every 100 dollars trade was illicit that year. Magnitude of 10 times less in illicit trade intensity.

But of course as Billu the official Bengali test-maker says....its because India is much more "red tape" than BD

 

[Nilgiri]

@Dubious @waz

Please merge with existing thread:

https://defence.pk/pdf/threads/81-74b-siphoned-in-11-years-from-bangladesh.599272/