In order to curb illicit capital flight from Bangladesh, economists suggested bringing transparency in the publishing of export-import data and introducing latest technology to fight misinvoicing.
However, business people want strong monitoring and devising a mechanism to find out how money is being laundered out of the country.
These recommendations came as the aftermath of a report by Washington-based research and advisory organization Global Financial Integrity (GFI), titled 'Illicit Financial Flows to and from 148 Developing Countries: 2006-2015'.
According to the report published on Monday, $5.9 billion flew out of Bangladesh in 2015 via misinvoicing, down from $9.1 billion in 2014.
Trade misinvoicing is a method of moving illicit financial flows (IFFs), and includes the deliberate misrepresentation of the value of imports or exports in order to evade customs duties and VAT (value-added tax), to launder the proceeds earned from criminal activities, or to hide the proceeds of legitimate trade transactions offshore.
“IFFs have remained a persistently large share of developing country trade over the ten-year period," said the report.
Therefore, trade misinvoicing remains an "obstacle to achieving sustainable and equitable growth in the developing world", the report it added.
On average, trade misinvoicing is equivalent to 18% of the total trade with advanced economies among all developing countries. Bangladesh’s trade misinvoicing was equivalent to 17.71% in 2015.
Increasing trade among developing and emerging market countries is seen by many economists as a primary path to greater development, the report stated.
However, the report stated that high levels of misinvoicing, as a percentage of total trade, indicate that most developing country governments do not benefit from a significant portion of their international trade transactions with advanced economies.
Trade experts agreed with the report, and opined that by stopping misinvoicing, Bangladesh can significantly reduce capital flight.
Speaking to the Dhaka Tribune, Selim Raihan, executive director of South Asian Network on Economic Modeling (SANEM), said: “There are discrepancies between the export-import data published by our country and the countries we trade with."
Selim called for greater transparency and suggested the government use latest technology to cross-check data with the export destinations.
"Sometimes both the exporters and importers show false value of products to launder money. There should be a mechanism to check the approximate value of goods to be imported or exported," the economist furthered.
Selim also advised private sector banks to have an intelligence team to verify the letters of credit (L/Cs) and to enhance the efficiency of officials dealing with the issues to stop fraudulent transactions, said Selim.
President of Federation of Bangladesh Chambers of Commerce & Industries (FBCCI) Shafiul Islam Mohiuddin said that bona fide businessmen never under-invoice exports or over-invoice imports.
"Sometimes, business people, bureaucrats, and politicians send money through different means to bear education costs of their children abroad," said Shafiul.
He explained that business people of one country alone cannot siphon off illicit money, adding that "it is done in collaboration" with unscrupulous individuals of the destination countries. "In order to stop capital outflow, we need agreements with other countries so that we can recover the capital," said Shafiul.
He urged the government to bring to book whoever is involved with the crime and identify how the money is laundered.
"But the good news is that capital flight from Bangladesh is on a downtrend, thanks to government action against corruption."
Bangladesh Bank, the regulator of all financial institutions in country, claimed that they are very active in preventing money laundering, which reduced the amount from $9.1 billion in 2014.
“Bangladesh Bank has been very active in curbing the illicit outflow of money in the past few years. and it has strongly monitored trade so that no one can under-invoice or over-invoice,” said the central bank's spokesperson and Executive Director Serajul Islam.
He added that government agencies such as the Anti Corruption Commission (ACC) and Bangladesh Financial Intelligence Unit (BFIU) were also very vigilant in recent years.
Meanwhile, economists suggested that by restoring political stability in the country and stopping misinvoicing, illicit outflow of capital can be stopped.
“In curbing the illicit outflow of capital, Bangladesh has to remove political uncertainty,” said former adviser to the caretaker government AB Mirza Azizul Islam, adding that an investment friendly atmosphere must also be ensured to encourage investments.
He furthered that Bangladesh has to increase the capacity of ports and adopt scientific monitoring to prevent misinvoicing.
"Fighting corruption is another tool to stop money laundering," he added.
Selim Raihan, also a professor of the Department of Economics at Dhaka University, suggested that if the government ensures an investment-friendly environment, capital flight may decrease.
