The Swiss Deposits Mystery and Bangladesh’s Fight Against Illicit Financial Flows

Money laundering has long been one of Bangladesh’s most persistent economic and governance challenges.

For decades, successive governments have faced allegations that billions of dollars have left the country through trade mis-invoicing, loan fraud, tax evasion, corruption, and illicit financial transfers. Yet allegations, however widespread, are not evidence.

In any democratic society governed by the rule of law, guilt must be established through credible investigation and judicial determination, not political rhetoric.

Nevertheless, recent developments have revived public concern over illicit financial flows and raised important questions about Bangladesh’s financial governance.

According to data published by the Swiss National Bank (SNB), deposits associated with Bangladesh rose dramatically in the past two years. Reported deposits increased from approximately CHF177 million in 2023 to about CHF590 million in 2024 and further to more than CHF834 million in 2025. The increase is substantial and statistically significant.

However, the figures themselves do not answer the most important question: Why did these deposits increase? This question becomes even more intriguing when viewed against Bangladesh’s broader macroeconomic environment.

Since 2022, Bangladesh has experienced one of the most severe foreign exchange shortages in its recent history. Official reserves declined significantly. Banks struggled to obtain sufficient US dollars for import payments. Many importers were unable to open letters of credit on time.

Industrial production slowed because raw materials and machinery could not be imported smoothly. Businesses repeatedly complained that dollar scarcity had become one of their greatest operational challenges.

In response, Bangladesh Bank adopted a series of restrictive measures designed to conserve foreign exchange. Import controls were tightened, exchange rate management became more interventionist, and liquidity pressures intensified throughout the banking sector.

Under such circumstances, conventional economic logic would suggest that domestic banks would conserve foreign currency rather than increase deposits abroad.

Yet, according to Swiss National Bank data, Bangladesh-linked deposits rose sharply. This apparent contradiction deserves careful examination.

Before reaching any conclusions, it is important to understand what the Swiss statistics actually measure.

The reported figures include deposits belonging to commercial banks, financial institutions, corporations, and private individuals.

They do not identify the beneficial owners. They do not indicate whether the money originated legally or illegally. Most importantly, they do not reveal when the money actually left Bangladesh.

Consequently, a rise in reported deposits cannot automatically be interpreted as evidence of increased money laundering during the reporting period.Unfortunately, public debate often ignores these distinctions.

Several explanations may account for the increase. One possibility is routine international banking operations.

Commercial banks maintain correspondent accounts with foreign banks to facilitate trade finance, foreign exchange settlements, international payments, and liquidity management. During periods of uncertainty, banks may increase such balances as a precautionary measure.

A second explanation is accounting or portfolio reallocation. Funds transferred abroad years earlier may have been shifted between institutions or reclassified in ways that increase reported Swiss balances without representing fresh capital flight from Bangladesh.

Third, multinational companies and financial institutions often reorganize treasury operations depending on changing regulatory requirements, international interest rates, and commercial considerations. Each of these explanations is economically plausible.

However, none fully resolves the central puzzle.
The Missing Economic Driver lies in the fact that unlike previous administrations, the interim government has not undertaken large infrastructure projects requiring massive foreign procurement.

There have been no projects comparable in scale to the Padma Bridge, Rooppur Nuclear Power Plant, Dhaka Metro Rail, Matarbari Deep Sea Port, or Karnaphuli Tunnel.

Imports of capital machinery have remained modest. Public development expenditure has been restrained while the government has focused primarily on other issues not related to developmental mega projects.

If large public investments were absent, what generated the additional foreign currency that reportedly accumulated in Swiss banks? This question remains unanswered.

Could It Be a Capital Flight? This question although not proven, but genuine, and the people deserve a transparent explanation of that question. Some analysts have suggested that the increase could reflect continuing capital flight.

Bangladesh has a long history of illicit financial outflows through under-invoicing of exports, over-invoicing of imports, fraudulent loans, tax evasion, and overseas asset acquisition.

International studies over many years have estimated substantial illicit financial outflows from developing countries through these mechanisms.

Transparency International Bangladesh (TIB) has consistently argued that Bangladesh requires stronger institutions to combat corruption and illicit financial flows.

Its recent assessments recognize initiatives undertaken to investigate alleged financial crimes accumulated over previous years while simultaneously criticizing the slow pace of institutional reform, weaknesses in governance, and inadequate transparency.

Rather than engaging in partisan accusations, policymakers should answer several straightforward questions.

· Which Bangladeshi banks increased their Swiss deposits?
· How much did each institution deposit?

· Were these funds placed under Bangladesh Bank instructions?
· Did they originate from domestic operations, export earnings, foreign branches, or offshore subsidiaries?

· Were the deposits necessary for correspondent banking relationships?
· Did these foreign placements reduce the availability of dollars within Bangladesh?
· Have the Bangladesh Financial Intelligence Unit (BFIU), Bangladesh Bank, and the Anti-Corruption Commission (ACC) undertaken forensic examinations of these transactions?
None of these questions imply wrongdoing. All of them deserve answers.

Transparency Matters, because Money laundering is not merely a legal issue. It is fundamentally an economic issue. Every dollar that leaves Bangladesh illegally reduces domestic investment. It weakens foreign exchange reserves. It reduces tax revenue.

It undermines confidence in financial institutions. It discourages foreign investment and increases borrowing costs. Ultimately, it slows economic growth and reduces employment opportunities.

Countries that successfully combat illicit financial flows generally possess three characteristics:
· independent financial regulators;
· strong anti-money laundering enforcement; and
· transparent public disclosure.
Bangladesh has made progress in strengthening its legal framework, but implementation remains uneven.

The most important for the policy makers is that evidence must prevail over speculation. The recent increase in Bangladesh-linked Swiss deposits presents an economic puzzle.

It does not constitute proof of money laundering. Nor does it prove that nothing unusual occurred. The available evidence supports only one conclusion: the anomaly deserves careful investigation.

The debate over Swiss deposits should therefore not become another contest of political narratives. Instead, it should become an opportunity to strengthen transparency, improve financial regulation, and demonstrate that accountability applies equally to all. Ultimately, public confidence is built neither by denying uncomfortable questions nor by making unsupported accusations.

It is built by following the evidence wherever it leads. In the long run, that commitment to transparency will do far more to protect Bangladesh’s economy than any political slogan or partisan debate.

(The author: Professor, Canadian University of Bangladesh)