Bangladeshi deposits with Swiss banks fall, but not money laundering as a whole

Switzerland is losing its attraction as a safe haven for parking money in the country’s banks – via illegal channels from South Asian nationals – as deposits with banks from most countries, including Bangladesh, have declined in 2019.

After a sharp rise of 28.34% to 617.72 million Swiss francs (CHF) in 2018, deposits of Bangladeshis with various Swiss banks dropped by 2.38% to 603.02 million CHF in 2019.

The Swiss National Bank (SNB) presented the data in its annual report titled, “Banks in Switzerland 2019” on Thursday.

Similar to Bangladesh, other South Asian countries also saw a declining trend. Pakistan saw the biggest fall of deposit by its nationals, which went down by over 50.42% to 360 million Swiss francs, and India by 5.06% to CHF892.03 million.

Deposit from Nepal also saw a 29.31% decline to CHF175.86 million, Sri Lanka by 29.41% to CHF4 million and Myanmar by 1.57% to CHF4.76 million. 

From the region, only Afghanistan saw a positive growth by 62.25% to CHF4.52 million, which was 2.78 million in 2018.

How are funds deposited?

Usually, the money is deposited through fiduciaries or wealth managers. 

Besides, over and under-invoicing during export and imports is a safe way to launder money.

“About 80% of money laundering occurred through trade-based money laundering. This money is deposited in individual accounts,” Abu Hena Md Razi Hasan, chief of the Bangladesh Financial Intelligence Unit (BFIU) told Dhaka Tribune.

Why did deposits decline?

“Switzerland was known as a safe haven for deposits. But it has lost that attraction due to the strong implementation of banking and money laundering rules in case of banking transactions,” Zahid Hussain, former lead economist of World Bank, Bangladesh told Dhaka Tribune.

Especially after 9/11, the issue of money laundering came under the spotlight and this has cast a shadow on the deposits negatively, he said. 

Meanwhile, Bangladesh Financial Intelligence Unit (BFIU), working on stopping money laundering also echoed the economist’s opinion. 

“Switzerland cannot entertain the illegal depositors as they did in the past. This is because of international pressures on the implantation of money laundering rules and guidelines,” BFIU chief Razi Hasan told Dhaka Tribune.

The downward trend is not only in the case of Bangladesh but across the globe, he added.

What does decline mean?

Although the money stashed by Bangladeshi nationals in different Swiss banks declined slightly, it does not mean money-laundering has fallen. Rather it continues in different forms and channels, said the experts.

“Although the latest figures are slightly less than that for the previously disclosed data, the decline is not only insignificant but also shows the persistence of capital flight from the country, largely through illicit transfers,” Dr Iftekharuzzaman, executive director of Transparency Internal, Bangladesh (TIB) told Dhaka Tribune.

Moreover, the Swiss Bank data only shows the tip of the iceberg. Information on such transfers in a lot of other destination countries, especially offshore islands, remains undisclosed. Many times, larger amounts are incessantly laundered out of the country, he added.

The intelligence unit, as well as the economist, agreed with the anti-corruption watchdog. 

“Fall in deposits in Swiss banks does not ensure that money laundering has fallen. The launderers changed the route and channels. Instead of deposits, they make investments in restaurants, hotels, and apartments in countries like Thailand, Singapore, Canada, and many more,” said Zahid Hussain.

According to a Global Financial Integrity report, $5.9 billion was siphoned off from Bangladesh in 2015.

How to stop laundering? 

Economists and rights groups, as well as, businesspersons opined that stopping corruption, and scrapping endless impunity to whiten black money are keys to stop laundering.

“Even in the proposed budget for the 2020-21 fiscal year, the government allowed black money holders to whiten it with a 10% tax. Unless there will be a pressure to whiten within a certain period, it will continue,” said economist Zahid Hussain.

So, the government should stop the source of making black money, and scrap the opportunity of whitening, by only giving a certain timeframe, since it did not benefit the government in generating revenue, he added.

If the opportunity is given every year in the budget, they won't take the opportunity, but rather wait for further extension, he added. 

On the other hand, the culture of impunity is another reason, which is a barrier to stop laundering.

“Hardly anything happens to those who are involved in illicit transfers as many of them are so powerful that they dictate terms more than the laws and regulations,” said Iftekharuzzaman.

It is ironic that such impunity is granted to a crime like illicit money transfers from a country which is starved of capital and revenue, he added.

Subject to political will and enforcement capacity without fear or favour, laundered money can be repatriated and accountability can be ensured, as many countries are doing through Mutual Legal Assistance between sending and receiving countries under the UN Conversation against Corruption, of which Bangladesh is a signatory State Party, said Iftekharuzzaman.

Meanwhile, the BFIU stressed on implementation of guidelines to stop trade-based laundering.

“We have prepared an effective and strong guideline to stop trade-based money laundering. If it is fully implanted then illegal transactions or deposits with Swiss Banks will come down,” said Razi Hasan.