Global watchdog finds loopholes in banking, procurement | The Daily Star
12:00 AM, October 22, 2015 / LAST MODIFIED: 12:00 AM, October 22, 2015

MONEY LAUNDERING

Global watchdog finds loopholes in banking, procurement

The Financial Action Task Force, the global watchdog for anti-money laundering and terrorist financing, has identified loopholes in the government procurement methods and the banking sector through which illegal outflows can take place.

The disclosure comes after an eight-member team of the FATF conducted a thorough evaluation of the measures in place in Bangladesh to combat money laundering and terrorist financing.

The team presented the findings of its 11-day review in a meeting yesterday with Finance Minister AMA Muhith at his residence.

Muhith told reporters after the meeting that the FATF team expressed their anxiety over three issues: the government procurement methods, gold smuggling and weaknesses in the banking sector. He assured the FATF team that amendments will be made to the procurement law.

Besides, an international seminar will be organised by the central procurement unit of the finance ministry next month to further strengthen procurement laws and systems.

At present, there are some opaque steps in the procurement system through which money laundering can take place, he said, adding that the government will move to make the purchase process more transparent.

Referring to the FATF team's observations about gold smuggling, Muhith acknowledged it, and said huge amounts of gold have been sneaked out through Bangladesh. Bangladesh is being used by the gold smugglers as a byway to the Middle East or India, he said.

 

The team, however, expressed satisfaction as Bangladesh has recently caught a number of gold consignments, according to a finance ministry official.

The finance minister told reporters that the Bangladesh Bank has also started taking some steps regarding gold smuggling.

The government will focus on it in the next budget and, if necessary, will take assistance from the international organisations.

About the banking sector, the team expressed concern about the state banks, especially Sonali and BASIC.

Muhith said he will reveal his plan of action for the state banks in the next two months, but before he does so, he will sit with the prime minister to discuss them.

While the team expressed satisfaction over the steps taken after the scams were unearthed, they are concerned that the measures in place were not robust enough to prevent the scams from occurring in the first place, a finance ministry official said.

To sum up, the FATF team said the strategy employed by the government to prevent money laundering activities is adequate but the follow-up action being taken is not up to expectation, Muhith said.

The finance ministry official said the FATF taskforce will submit a draft report to the government on its observation from its 11-day tour to Bangladesh.

After taking the government's opinion they will submit the final report next year, on the basis of which the FATF will determine whether Bangladesh will continue to remain out of the grey list of the watchdog.

The country was delisted in February last year. Staying out of the list reduces the time and costs for the country's financial transactions with the rest of the world.

Every member country must identify, assess and understand the money laundering and terrorist financing risks for the country, according to the FATF.

The country should take action, including designating an authority or mechanism to coordinate actions to assess risks, and apply resources, aimed at ensuring that the risks are mitigated effectively.

The finance ministry official said they have already prepared a national risk assessment report and based on that they will take the next steps.

The report dealt with sector-specific risk assessment of banks, non-bank financial institutions, money changers and money remitters, insurance companies, capital market intermediaries, and non-governmental organisations.

The official said the FATF will evaluate Bangladesh in two ways -- technical compliance and effectiveness.

The FATF team was “very happy” about the country's technical compliance, but Bangladesh has some weaknesses regarding effectiveness that needs to be overcome, he added.

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