BD loses $68b to illicit trade flows over a decade
Bangladesh lost an estimated $68 billion through illicit financial outflows (IFFs) between 2013 and 2022, placing the country among the top 10 developing Asian nations for trade-related discrepancies with advanced economies.
The Washington-based think tank Global Financial Integrity (GFI) highlighted these findings in its report, “Trade-related Illicit Financial Flows in Developing Asia 2013–2022”, released on Friday, warning of persistent risks to the nation’s financial stability.
On average, Bangladesh lost around $6.8 billion annually equivalent to 16 percent of its global trade primarily due to trade misinvoicing.
Of the total, roughly $32.8 billion involved transactions with advanced economies, underscoring Bangladesh’s exposure to trade-based money laundering.
Over-invoicing of capital machinery imports, which benefit from subsidised loans, was identified as a major source of these illicit flows.
IFFs are broadly defined as money or value that crosses borders illegally, either in its source, transfer, or use.
The report noted that such flows undermine domestic resource mobilisation, reduce tax revenue, and limit fiscal space for public services and infrastructure investment.
Larger economies with high trade volumes typically show the largest outflows.
For example, China accounted for $6.96 trillion in cumulative trade gaps over the decade, followed by Thailand ($1.18 trillion) and India ($1.06 trillion).
In proportional terms, illicit flows represented 24.9 percent of China’s trade, 21.8 percent for India, 15.5 percent for Nepal, and 14.8 percent for Bhutan.
The GFI report emphasized that Bangladesh’s illicit outflows are closely tied to trade with advanced economies rather than regional partners.
Asian exports to these markets are often deliberately underpriced to evade resource rent taxes, while financial hubs like Singapore and Hong Kong act as intermediaries in misinvoicing schemes, serving as transit or booking centers for illicit profits.
The report described trade misinvoicing with advanced economies as a “critical subset” of Asia’s illicit flows, highlighting that South-South trade misinvoicing, though significant, is less impactful.
Prof. Selim Raihan of Dhaka University, caution that official estimates vary due to delayed reporting and differing methodologies.
He urged the government to verify trade and remittance data with partner countries and strengthen monitoring systems to ensure import prices reflect global market rates.
Raihan also highlighted that illegal channels, such as hundi, divert foreign currency away from official channels, exacerbating IFFs.
The GFI report concluded that illicit flows deprive governments of revenue, weaken the rule of law, and impede development and poverty reduction.
It called for stronger customs enforcement, greater transparency in free trade zones, regional data-sharing agreements, and international collaboration.
Without political will and enforcement, Bangladesh’s wealth risks continuing to benefit offshore interests rather than supporting domestic development, a concern that grows as the 2030 Sustainable Development Goals deadline approaches.
