report in Dhaka Tribune, Nov 16, 2022
The Bangladesh Bank has found cases of money laundering as it uncovered trade-based under and over-invoicing during a special audit.
Some entities inflated their price at the range of 20-200% than the actual cost of the products under a method called over-invoicing, said GM Abul Kalam Azad, spokesperson of the Bangladesh Bank, at a press briefing on Monday.
Over-invoicing takes place when exporters submit an inflated invoice to the importers, generating a payment that exceeds the value of the shipped goods in order to launder money abroad.
“The entities opened letters of credit (LCs) by overstating the price of the goods concealing the actual price,” Azad said.
Under-invoicing happens when the price of a good on an invoice is less than the price paid.
It usually happens when either the importer or exporter wants to reduce a tariff or if the buyer or seller wants to lower their profits to pay lower taxes.
The central bank had not monitored the under and over-invoicing in the financial sector before the instability hit the global market because of the post-Covid situation and the Ukraine-Russia war.
It came after the foreign currency reserves nosedived due to the escalated import payments, causing volatility in the foreign exchange regime of Bangladesh, forcing the taka to dip against the US dollar and sending inflation to a decade high.
Under such a situation, the cases of over-invoicing have been detected, Azad said.
The BB shared the findings at a time when illegal money transfers through various channels, including under and over-invoicing of internationally-traded goods, out of the country are believed to be rampant.
The Washington-based Global Financial Integrity (GFI) in December last year said Bangladesh lost $8.27 billion every year on average between 2009 and 2018 resulting from misinvoicing of values of imported and exported goods by traders to evade taxes and illegally move money across international borders.
The average loss of customs and taxes was 17.3% of Bangladesh’s trade with all its trading partners during those years.
The central bank spokesperson could not provide precise information immediately when asked whether the BB has taken any measures to tackle over-invoicing.
But the authorities have definitely considered taking action against the entities involved in the over-invoicing, Azad said.
It would also take some time for the BB to provide information about the products that saw the excessive prices.
https://www.dhakatribune.com/banks/2022/11/15/bangladesh-bank-detects-trade-based-money-laundering
