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Money laundering threatens to render development meaningless

M A  Khaleque

M A Khaleque

Wed, 3 Jul 24

Former State Minister for Planning, eminent economist Dr. Shamsul Alam expressed his concern over money laundering while delivering a keynote speech at a seminar organized by the Bangladesh Agricultural Economists Association on June 20. The seminar's theme was "Bangladesh's Economy in the Global Context: Growth, Inflation, Food, and Nutrition." Dr. Shamsul Alam stated that each year, 7 to 8 billion US dollars are being laundered from Bangladesh. He identified money laundering as a significant reason behind the ongoing foreign currency reserve crisis in the country. The former State Minister also mentioned that money laundering is creating complex problems for the country's economy.

Dr. Shamsul Alam is a renowned economist and a high-ranking official who has a thorough understanding of the state of the country's economy. His statements deserve special attention. However, it is clear that the former State Minister himself is not certain about the exact statistics of money laundering he mentioned. These figures are based on estimates. He stated that 7 to 8 billion US dollars are being laundered each year, which means he is not sure about the exact amount of money being laundered annually. The difference in the figures he provided is significant. He aimed to indicate that the amount laundered each year could be around 7 billion US dollars or 8 billion US dollars.

It should be noted that no individual or organization can definitively state the total amount or statistics of money laundering, black money, and undisclosed income. Those involved in money laundering or such unethical activities never disclose the amount and source of their earnings. Therefore, it is not possible for any person or organization to confirm the exact size of the underground economy. However, it can be assumed that there is a significant amount of black money in the country. This black money is being laundered in various ways. The statistics on money laundering and black money published by international organizations are also not based on confirmed data but are estimates. In a report published by the Ministry of Finance in 2012, it was mentioned that the size of Bangladesh's underground economy ranges from 45% to 85% of GDP, which is also an estimate.

A few years ago, a former President of the World Bank mentioned that the amount of money laundered globally each year is equivalent to 2 to 5 percent of the world's GDP, amounting to 850 billion US dollars to 2 trillion US dollars. It is evident that his figures were also based on estimates, as even as the head of an organization like the World Bank, he could not definitively state the exact amount of money being laundered globally each year. Many people are integrating their black money into the mainstream economy through various processes; those who cannot do so are laundering their money abroad. As long as corruption prevails in the country, money laundering will continue. No country in the world can claim to be free from the problem of money laundering.

Black money is creating various problems in a country's economy. Since there are legal issues regarding the use of black money, those who have the opportunity are laundering their illegally earned money abroad. Due to money laundering, the government is deprived of substantial revenue each year. The increase in the presence of black money is rapidly widening the gap between the rich and the poor in the country. One of the ideals of Bangladesh's independence movement was to create an exploitation-free society by eliminating economic disparity, where every citizen would benefit from national development according to their capabilities. However, this ideal of independence is on the verge of being undermined. According to the Gini, the economic disparity between the rich and the poor in Bangladesh was relatively tolerable after independence; it has now reached an intolerable level.

Former Foreign Minister Dr. A.K. Abdul Momen recently shared in a private conversation that he once personally investigated the Bangladeshis who own houses or apartments in Begumpur, Canada. To his astonishment, he found that government officials owned more properties than politicians or businessmen. He noted that former police chief Dr. Benazir Ahmed's example of corruption is not isolated; if one looks into various levels of the police force, thousands of such examples can be found.

The people of the country are demanding punitive actions against corrupt individuals like Benazir. However, instead of taking that path, the government has arranged to grant 'immunity' to these corrupt individuals. The proposed budget for the upcoming fiscal year (2024-25) includes a provision to legalize black money by paying a 15% tax. This means that if an individual or institution has acquired substantial assets through corruption and pays 15% tax on their earnings, no questions will be asked about the source of their wealth. In contrast, those with honestly earned money have to pay up to 30% tax. This is akin to showing leniency towards illegal money earners while oppressing legitimate taxpayers. During British rule, state officials were kept loyal through various unethical privileges. This practice continues even today. Local leaders of the ruling party who cannot be given any official position are appointed to the boards of various state institutions. Once appointed, their primary responsibility becomes amassing wealth through corruption.

Former State Minister for Planning Shamsul Alam stated that money laundering is one of the major reasons for the foreign currency crisis in the country. His statement warrants explanation. He spoke on a highly sensitive issue, noting that those who earn money through unethical means cannot use it indisputably within the country. Hence, to secure their illegally earned money, they launder it abroad. The purpose of sending money abroad is to integrate it into the mainstream economy through various processes. This process of legalizing illegal money through various methods is called money laundering. Money laundering can occur domestically or through the transfer of money abroad. The worst and most harmful method of money laundering is sending money abroad. Once money is laundered abroad, it can somehow be legitimized. If those with illegal money were to use it within the country, it could benefit the nation. However, instead of doing so, they use their illegally earned money abroad, benefiting the foreign country instead. As the saying goes, "Once foreign robbers used to loot money from our country, and now a group of miscreants from our country is handing over the money to foreigners." Those who use illegally earned money abroad can never be friends of the country; they are enemies of the nation. Showing any leniency towards them is not right.

The government's proposal to include a provision in the next budget to legalize black money by paying a 15% tax is not justified in any way. Very little money will come into the country through this provision. Those who launder money know well that nothing will happen even if they do not respond to the government’s call. The tax rate for black money holders should never be lower than that for those who pay taxes legally. Instead of repeatedly giving unethical opportunities to black money holders, they should be given a specific time frame to legalize their black money. If they fail to do so within that time, strict measures should be taken. The most important thing is to ensure that no one has the opportunity to earn money illegally. Preventive measures are better than taking action after a crime has been committed. It is crucial to ensure that no one can acquire black money. Honest and capable individuals must be appointed to the top positions in every institution so that they can perform their duties impartially.

MA Khaleq: Retired General Manager, Bangladesh Development Bank Plc and Writer on Economic Affairs.

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