$5.9b siphoned off in 2015

Bangladesh second in South Asia, among top 30 countries in world in terms of illicit financial flows

Rejaul Karim Byron

Some $5.9 billion was siphoned out of Bangladesh in 2015 through trade misinvoicing, the Global Financial Integrity (GFI) said in a report yesterday.

Bangladesh ranked second in South Asia in terms of illicit outflows of money, according to the report. 

The Washington-based research and advisory organisation came out with the findings by analysing data of trade in goods of 148 developing countries with advanced economies. The report, based on International Monetary Fund (IMF) data, also said $2.36 billion entered the country in 2015.

The GFI said trade-related illicit financial flows (IFFs) appear to be both significant and persistent features of developing country trade with advanced economies. 

“Trade misinvoicing remains an obstacle to achieving sustainable and equitable growth in the developing world,” said the GFI report titled “Illicit Financial Flows to and from 148 Developing Countries: 2006-2015”.

The GFI defines IFFs as money that is illegally earned, used or moved and which crosses an international border.

Trade misinvoicing is a method of moving IFFs, and includes the deliberate misrepresentation of the value of imports or exports in order to evade customs duties and VAT, launder the proceeds of criminal activity or to hide offshore the proceeds of legitimate trade transactions, among other motivations, it said.

The new study comes more than a year after the GFI's 2017 report which estimated that Bangladesh had lost between $6 billion and $9 billion to illicit money outflows in 2014.

At that time, the GFI analysed discrepancies between bilateral trade statistics and balance of payments data, as reported to the IMF, to detect flows of capital that were illegally earned, transferred, or utilised.

This year, the GFI detected the IFFs by analysing the trade data on over invoicing and under invoicing. 

The GFI found Bangladesh was one of the top 30 of countries, ranked by dollar value of illicit outflows in 2015. These countries not only include resource-rich countries such as South Africa and Nigeria but also European countries such as Turkey and South American nation Brazil.

The Asian countries in the top 30 countries in this category include Malaysia, India and the Philippines. The amount of IFFs from Malaysia was $33.7 billion, $9.8 billion from India and $5.1 billion from the Philippines.

Bangladesh lost the second highest amount of fund through IFFS after India among the South Asian nations. The illegal outflow through trade misinvoicing in other South Asian countries including Pakistan, Sri Lanka was less than a billion dollar.

The research and advisory organisation said increasing trade among developing and emerging market countries is seen by many economists as a primary path to greater development.

“However, high levels of misinvoicing, as a percentage of total trade, indicate that most developing country governments do not benefit from a significant portion of their international trade transactions with advanced economies,” said the GFI.

The GFI data showed that the amount of IFFs from Bangladesh was 17.5 percent of the nation's total trade with advanced countries at $33.73 billion in 2015.

In its previous report, the GFI said Bangladesh lost $75 billion due to trade misinvoicing and other unrecorded outflows between 2005 and 2014.

• Courtesy: The Daily Star /Jan 29, 2019