BIBM study finds uneven anti-money laundering enforcement in Bangladesh

Bangladesh has a strict anti-money laundering framework, but implementation remains uneven across the banking sector, according to a paper presented yesterday.

Shah Mohammad Ahsan Habib, professor at the Bangladesh Institute of Bank Management (BIBM), presented the paper at a workshop titled “Trade Services Operations of Banks” held at the BIBM auditorium in Dhaka.

Tap Here to Add The Daily Star As A Trusted Source

The paper said many banks lack centralised trade monitoring systems, automated red-flag detection, reliable price-benchmarking tools, vessel-tracking systems and trained trade compliance officers, limiting the effectiveness of the existing framework.

The weakness becomes more critical as Bangladesh Bank moves towards risk-based supervision, aiming to bring qualitative changes to the monitoring and regulation of banks.

Under the supervision, banks are expected to demonstrate not only compliance with circulars but also effective risk identification, mitigation, escalation, reporting and board-level accountability.

The paper lists several anti-money laundering (AML) mechanisms, including the Money Laundering Prevention Act, trade-based money laundering guidelines, and lastly, the goAML reporting platform, which was developed by the United Nations Office on Drugs and Crime to help Financial Intelligence Units combat money laundering and terrorist financing.

Besides Ahsan Habib, the paper was prepared by Tofayel Ahmed, assistant professor at the BIBM; Rahat Banu, assistant professor at the BIBM; Rajib Kumar Das, lecturer at the BIBM; Mohammad Arafat Ali, additional director of the Foreign Exchange Policy Department-1 at Bangladesh Bank; and ATM Nesarul Hoque, executive vice president of Mutual Trust Bank PLC.

The paper said the core concern in Bangladesh is not the absence of compliance rules but the lack of a strong compliance culture across many banks and trade finance operations.

It said weak screening, poor price verification, inadequate beneficial ownership checks, fragmented branch-level decisions, manual document reviews and limited coordination with customs, BFIU, NBR and Bangladesh Bank create significant risks, enabling over-invoicing, under-invoicing, false shipment documentation, capital flight, sanctions exposure and trade-based money laundering.

Focus group discussions also indicated that weak compliance is affecting Bangladesh’s external banking relationships. Banks reported limited access to foreign credit lines and difficulties obtaining LC (letter of credit) confirmation from correspondent banks because of rising country risk perceptions.

The paper said compliance failures now directly affect trade settlement capacity, access to foreign funding, transaction costs and Bangladesh’s credibility in international banking.

The BB governor said some local banks are burdened with toxic assets, creating distrust. Other banks are reluctant to purchase their bills, fearing commitments will not be honoured, eroding confidence in both individual banks and the country.

SMEs struggle with imports because they rely on middlemen, raising costs and reducing competitiveness. Recalling an example from 2000, he said an SME importer tried to enter the third-party market cooperation (TPMC) market with a $100,000 LC, but a market giant immediately halved prices to drive it out.

Despite these challenges, SMEs perform well in exports, particularly in non-traditional sectors. Banks support them through advances, bill discounting and back-to-back export financing, he added.

Faruk Ahmed, deputy managing director of City Bank PLC; Syed Sazzad Haider Chowdhury, deputy managing director at Prime Bank PLC; Mahmudur Rahman, deputy managing director at the Islami Bank Bangladesh PLC; Md Ali Hossain Prodhania, chairman at the NRBC Bank PLC; and Md Ezazul Islam, director general of BIBM, also spoke at the event.