Keywords
Abstract
Trade-based money laundering (TBML) presents a pressing threat to Bangladesh, a nation reliant on its $110 billion trade ecosystem for economic growth. This paper investigates TBML’s mechanisms, risks, and mitigation strategies within Bangladesh’s unique financial and trade landscape. TBML exploits legitimate trade channels through techniques such as over- and under- invoicing, phantom shipments, and multiple invoicing, infiltrating the ready-made garments sector—contributing over 80% of exports—and machinery imports. This paper reveals how weak documentation, limited technology, and cross-border vulnerabilities enable these schemes by drawing on qualitative data from interviews with 15–20 bankers, traders, and regulators, supplemented by Bangladesh Bank reports and Financial Action Task Force guidelines. Notable cases, including the 2023 laundering of BDT 13.96 billion via fraudulent Letters of Credit and the Hallmark Group’s BDT 25 billion fraud, highlight TBML’s scale.
The risks are profound: economic losses drain foreign exchange reserves—down to $20.18 billion by January 2025—while financial instability, national security threats, and reputational damage jeopardize Bangladesh’s global standing. Regulatory efforts by the Bangladesh Bank and Bangladesh Financial Intelligence Unit show progress, yet enforcement falters due to inadequate training, manual processes, and slow prosecution. Operational barriers, including only 25% digitization in banking, compound these challenges. Recommendations include strengthening regulatory oversight, adopting AI and blockchain for transparency, enhancing training with International Chamber of Commerce collaboration, and fostering public-private and SAARC-level partnerships. These strategies aim to safeguard Bangladesh’s trade integrity amid its 9.94% inflation and shrinking reserves. This paper underscores the urgency of integrated action to protect Bangladesh’s economy, offering a roadmap for stakeholders and suggesting future research into digital trade’s preventive potential.
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