The International Monetary Fund (IMF) has advised Bangladesh to scrutinize at least five high-risk banks for potential involvement in money laundering and terrorism financing by next June.
This recommendation is part of the structural benchmarks set by the IMF as it completed the second review of its $4.7 billion lending package, resulting in the approval of a $1.148 billion third tranche release.
The IMF aims to improve Bangladesh’s Anti-Money Laundering (AML) and Combating Financing of Terrorism (CFT) status. According to an IMF document released on Tuesday, including this task in the structural benchmarks underscores the urgency of addressing these issues within the next 12 months.
Finance Division officials have indicated that the IMF has developed AML/CFT examination procedures as part of its technical assistance project. These procedures will be used to assess Bangladeshi banks’ involvement in illicit activities.
Former junior planning minister Shamsul Alam recently highlighted the severity of the issue, estimating that approximately $7.0 to $8.0 billion is being laundered overseas annually. This outflow is a significant contributor to the ongoing dollar crisis in Bangladesh. Economists attribute much of this illicit activity to trade mis-invoicing, where the values of exports and imports are under- or over-reported to evade taxes.
A 2021 report by the US-based watchdog Global Financial Integrity (GFI) revealed that Bangladesh lost nearly $8.27 billion annually, on average, between 2009 and 2018 due to traders’ misinvoicing. Despite this alarming figure, state agencies have struggled to curb money laundering or recover illicitly transferred funds.
In addition to scrutinizing high-risk banks, the IMF’s structural benchmarks for the coming year include several other measures aimed at improving financial transparency and efficiency. One such measure mandates that by the end of next June, at least 50 percent of central government transactions (excluding interest payments, subsidies, loans, equity, and liabilities) must be conducted through electronic funds transfer (EFT).
The government must also approve a development project proposal (DPP) for the digital transformation of income tax administration by next June. This proposal includes implementing an e-return and e-payment framework, with the goal of increasing revenue collection to support priority spending.
Furthermore, the IMF has directed the Ministry of Finance and Bangladesh Bank to issue guidelines for reforming the primary dealer system for government securities.
To further boost revenue collection, the IMF has tasked the National Board of Revenue with finalizing a Medium- and Long-term Revenue Strategy by the end of December. This strategy should cover both indirect and direct taxes and include an accompanying implementation framework.
