Steps needed to combat capital flight through misinvoicing
Combating capital flight through trade misinvoicing is critical for developing economies, as it drains vital foreign exchange, erodes the tax base, and fuels illicit financial flows.
According to the Global Financial Integrity (GFI) – a Washington DC-based think-tank, misinvoicing involves intentionally falsifying the value of imports/exports—often through over-invoicing imports or under-invoicing exports—to move money illegally across borders, particularly with advanced economies.
According to newspaper reports published yesterday quoting the GFI report released on 27 March, Bangladesh lost approximately $68 billion via illicit financial outflows from 2013-2022, primarily driven by trade misinvoicing.
This massive, persistent drain, averaging over $6 billion annually, highlights major failures in customs oversight and anti-money laundering enforcement, severely undermining national development finance and economic stability.
The findings suggest that Bangladesh’s exposure is not limited to regional trade but is tied to global supply chains, particularly in export-oriented sectors and import-dependent industries.
Compared to other South Asian countries, Bangladesh’s losses are substantial but remain far lower than India’s, which recorded more than $1.06 trillion in illicit trade flows over the same period.
Experts say, the standard international process for returning laundered money is through mutual legal assistance (MLA), a mechanism by which countries can request and provide assistance to one another in criminal matters.
Bangladesh has signed a number of mutual legal assistance treaties (MLATs) with countries such as India, the US, the UK, China, Singapore, South Korea, Malaysia, Russia, Vietnam, Sri Lanka, and Myanmar.
However, Bangladesh’s popular money laundering destinations, Canada, Cyprus, Switzerland remain missing from this list.
These cases show that while recovering laundered money is a long and challenging process, involving extensive legal battles, international cooperation, and asset tracing, it is achievable with the right mechanisms in place.
Success depends on the legal frameworks for asset recovery, enforcement of anti-money laundering (AML) laws, and willingness of countries to cooperate.
The matter is more challenging in Bangladesh perspective since our different controllable frameworks are extensively politicised which is why our hopes nipped in the bud.
It is also widely believed that money laundering is politically motivated in Bangladesh, facilitated by politicians and as well as politicised banking administrators, businesspeople, regulators and bureaucrats.
Hence, there should be a strong political will to start the recovery of laundered money.
The country needs to initiate recovery efforts, seeking expertise locally and internationally.
