Report on Money Laundering Act and Its

Implication in Bangladesh

1
Money Laundering Act and Implications
in Bangladesh
Prepared for:

Tazrina Farah
Assistant Professor
Department of Finance
University of Dhaka

Prepared by:

Group No. 02
Section: B
BBA 21st Batch
Department of Finance
University of Dhaka

April 10, 2016

2
 Group Profile
Group Number 02

Section: B
BBA 21st Batch
Department of Finance
University of Dhaka

Serial No. Name ID No. Remarks

1 S. M. Farzana Alam 21-005

2 Al Mamun Sheikh 21-008

3 Farzana Akhter 21-014

4 Muhammad Jubayer 21-017

5 Sadia Kumkum 21-020

6 Sonjoy Chowdhury 21-056

7 Arif Abdullah 21-107

8 Md.Abdul Mukit 21-262

3
 Letter of Transmittal
April 10, 2016

Tazrina Farah
Assistant Professor
Department of Finance,
University of Dhaka.

Subject: On the issue of submitting Group Report on “Money laundering Act in

Bangladesh”.

Dear Ma’am,

Here is the report of the study on “Money laundering Act in Bangladesh”.

We would like to say that this report was helpful for us to know about the current situations
of Money laundering and existing acts and regulation regarding money laundering in
Bangladesh. We also got have practical view through the real-life cases. We are very thankful
to you for giving us such a wonderful opportunity of widening our knowledge from the pages
of our book to the field of practice.

You will be happy to know that, we have tried our best to make this report more & more
informative and factual.

Sincerely Yours,

Md. Abdul Mukit

On behalf of the Group No. 02

ID NO: 21-262
BBA 21st Batch,
Section: B
Department of Finance
University of Dhaka

4
 Table of Content

Executive Summary ............................................................................................................................... 6

Chapter 1
Introduction .......................................................................................................................................... 07

Chapter 2
Theoritical Background ....................................................................................................................... 10

Chapter 3
Implication,Limitations and Recommendation(With real life cases) .................................................. 20

Chapter 4 .............................................................................................................................................. 29
Appendix .............................................................................................................................................. 30

5
 Executive Summary
We were assigned to study and analysis the the Money Laundering act and its implications in
Bangladesh.
This money laundering act generally refers to describe the process by which criminals
disguise the original ownership and control of the proceeds of criminal conduct by making
such proceeds appear to have derived from a legitimate source.

Studying the money laundering act, We have tried to present the Existing act regarding
Money laundering, it’s implication in Bangladesh prospect, the cases regarding money
laundering, how those cases were handled, what conclusions were derived from the cases and
so on. Moreover the scope of money laundering, how Bangladesh is going through the
offence Money laundering etc.

Here we analyze some real life cases to represent the current situation on this context and
how these actually are being solved through the acts. Though Bangladesh has now acts for
preventing money laundering but even after that there are some limitations too. So we also
covered this limitation very significantly in our report.

Apart from this analysis,we also came up with the concepts that will be helpful for
controlling money laundering more efficiently.

6
CHAPTER 1

Introduction

7
1.1The Origin of the Report
This report is a partial requirement of the Legal Environment of Business, F-205 course of
BBA curriculum at Department of Finance, University of Dhaka. This report is prepared on
the topic selected by us and assigned by our course teacher, Tazrina Farah .The report was
fully approved by our course teacher, Tazrina Farah, Assistance Professor, Department of
Finance, University of Dhaka. The topic of the Report is - “Money laundering Act in
Bangladesh.”

1.2 Background
The topic of this report is “Money laundering Act in Bangladesh.” In order to complete this
report we had to go through a research with the aid of a lot of secondary data. We did
research on our existing money laundering act , went through some real life cases regarding
money laundering.

1.3 Scope of the study

The scope of this analysis is limited within the students of University of Dhaka.

1.4 Objective of the study

The objective of the study is to present the Existing act regarding Money laundering, it’s
implication in Bangladesh prospect, the cases regarding money laundering, how those cases
were handled, what conclusions were derived from the cases and so on. Moreover the scope
of money laundering, how Bangladesh is going through the offence Money laundering etc.

1.4 Methodology
The main source of data used in this report is collected from several secondary source.

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1.5 Limitations
We face some usual restrictions during the course of our preparation.
Lack of Time: We face this constraint.
Data Insufficiency: Though we tried hard to have the access to all the data we could utilize,
there are still some routine lacking in the data in our report.
Inefficiency: As we are a beginner in money laundering act and its implication,we have this
problem.

9
 CHAPTER 2

Theoretical
Background

10
Money Laundering:
Money laundering is the generic term used to describe the process by which criminals
disguise the original ownership and control of the proceeds of criminal conduct by making
such proceeds appear to have derived from a legitimate source.

The processes by which criminally derived property may be laundered are extensive. Though
criminal money may be successfully laundered without the assistance of the financial sector,
the reality is that hundreds of billions of dollars of criminally derived money is laundered
through financial institutions, annually. The nature of the services and products offered by the
financial services industry (namely managing, controlling and possessing money and
property belonging to others) means that it is vulnerable to abuse by money launderers.

Money laundering in Bangladesh prospect:

According to the Bangladesh gadgets, June 2012, Money laundering means,

(i) Knowingly moving, converting, or transferring proceeds of crime or

property involved in an offence for the following purposes:-

(1) concealing or disguising the illicit nature, source, location,

ownership or control of the proceeds of crime; or
(2) assisting any person involved in the commission of the
predicate offence to evade the legal consequences of such
offence;

(ii) Smuggling money or property earned through legal or illegal means to

a foreign country;

(iii) knowingly transferring or remitting the proceeds of crime to a foreign

country or remitting or bringing them into Bangladesh from a foreign
country with the intention of hiding or disguising its illegal source; or
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 (iv) Concluding or attempting to conclude financial transactions in such a
manner so as to reporting requirement under this Act may be
avoided;

(v) Converting or moving or transferring property with the intention to

instigate or assist for committing a predicate offence;

(vi) Acquiring, possessing or using any property, knowing that such

property is the proceeds of a predicate offence;

(vii) Performing such activities so as to the illegal source of the proceeds

of crime may be concealed or disguised;

(viii) Participating in, associating with, conspiring, attempting, abetting,

instigate or counsel to commit any offences mentioned above;

Scope of the offence of Money laundering:

Different jurisdictions define crime predicating the offence of money laundering in different
ways. Generally the differences between the definitions may be summarized as follows:

• Differences in the degree of severity of crime regarded as sufficient to

predicate an offence of money laundering. For example in some jurisdictions it
is defined as being any crime that would be punishable by one or more year’s
imprisonment. In other jurisdictions the necessary punishment may be three or
five years imprisonment; or

• Differences in the requirement for the crime to be recognized both in the

country where it took place and by the laws of the jurisdiction where the
laundering activity takes place or simply a requirement for the conduct to be
regarded as a crime in the country where the laundering activity takes place
irrespective of how that conduct is treated in the country where it took place.

12
In practice almost all serious crimes, including, drug trafficking, terrorism, fraud, robbery,
prostitution, illegal gambling, arms trafficking, bribery and corruption are capable of
predicating money laundering offences in most jurisdictions.

Tax evasion and other fiscal offences are treated as predicate money laundering crimes in
most of the world’s most effectively regulated jurisdictions.

How the money is being laundered in

Bangladesh
The processes are extensive. Generally speaking, money is laundered whenever a person or
business deals in any way with another person’s benefit from crime. That can occur in a
countless number of diverse ways.

Traditionally money laundering has been described as a process which takes place in three
distinct stages.

Placement, the stage at which criminally derived funds are introduced in the financial
system.

Layering, the substantive stage of the process in which the property is ‘washed’ and its
ownership and source is disguised.

Integration, the final stage at which the ‘laundered’ property is re-introduced into the
legitimate economy.

This three staged definition of money laundering is highly simplistic. The reality is that the so
called stages often overlap and in some cases, for example in cases of financial crimes, there
is no requirement for the proceeds of crime to be ‘placed’.

Offence of money laundering and

punishment:

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 • For the purposes of this Act, money laundering shall be deemed to be an offence.
• Any person who commits or abets or conspires to commit the offence of money
laundering, shall be punished with imprisonment for a term of at least 4(four)
years but not exceeding 12(twelve) years and, in addition to that, a fine equivalent
to the twice of the value of the property involved in the offence or taka 10(ten)
lacks, whichever is greater.
• In addition to any fine or punishment, the court may pass an order to forfeit the
property of the convicted person in favor of the State which directly or indirectly
involved in or related with money laundering or any predicate offence.
• Any entity which commits an offence under this section shall be punished with a
fine of not less than twice of the value of the property or taka 20(twenty) lacks,
whichever is greater and in addition to this the registration of the said entity shall
be liable to be cancelled.
• It shall not be a prerequisite to charge or punish for money laundering to be
convicted or sentenced for any predicate offence.

Powers and responsibilities of Bangladesh

Bank in restraining and preventing the
offence of money laundering:
For the purposes of this Act, Bangladesh Bank shall have the following powers and
responsibilities, namely:-

(a) to analyze or review information related to cash transactions and suspicious

transactions received from any reporting organization and to collect additional
information relating thereto for the purpose of analyzing or reviewing from the
reporting organizations and maintain data on the same and, as the case may
be, provide with the said information to the relevant law enforcement agencies
for taking necessary actions;

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 (b) ask for any information or obtain a report from reporting organizations with
regard to any transaction in which there are reasonable grounds to believe that
the transaction involves in money laundering or a predicate offence;

(c) issue an order to any reporting organization to suspend or freeze transactions

of any account for a period not exceeding 30 (thirty) days if there are
reasonable grounds to suspect that any money or property has been deposited
into the account by committing any offence:

Provided that such order may be extended for additional period of a

maximum of 6 (six) months by 30 (thirty) days, if it appears necessary to find
out correct information relating to transactions of the account;

(d) issue, from time to time, any directions necessary for the prevention of money
laundering to the reporting organizations;

(e) monitor whether the reporting organizations have properly submitted

information and reports requested by Bangladesh Bank and whether they have
duly complied with the directions issued by it, and where necessary, carry out
on-site inspections of the reporting organizations to ascertain the same;

(f) arrange meetings and seminars including training for the officers and staff of
any organization or institution, including the reporting organizations,
considered necessary for the purpose of ensuring proper implementation of
this Act by Bangladesh Bank;

(g) Carry out any other functions necessary for the purposes of this Act.

2. If any investigation agency makes a request to provide it with any information in

any investigation relating to money laundering or suspicious transaction, then
Bangladesh Bank shall provide with such information where there is no obligation
for it under any existing law or for any other reason.

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 3. If any reporting organization fails to provide with the requested information
timely under this section, Bangladesh Bank may impose a fine on such
organization which may extend to a maximum of taka 5 (five) lacks at the rate of
taka 10 (ten) thousand per day and if any organization is fined more than 3(three)
times in 1(one) financial year, Bangladesh Bank may suspend the registration or
license of the organization or any of its branches, service centers, booths or agents
for the purpose of closing its operation within Bangladesh or, as the case may be,
shall inform the registration or licensing authority about the fact so as to the
relevant authority may take appropriate measures against the organization.
4. If any reporting organization provides with false information or statement
requested under this section, Bangladesh Bank may impose a fine on such
organization not less than taka 20 (twenty) thousand but not exceeding taka 5
(five) lacks and if any organization is fined more than 3(three) times in 1(one)
financial year, Bangladesh Bank may suspend the registration or license of the
organization or any of its branches, service centers, booths or agents for the
purpose of closing its operation within Bangladesh or, as the case may be, shall
inform the registration or licensing authority about the fact so as to the relevant
authority may take appropriate measures against the said organization.

Establishment of the Bangladesh Financial

Intelligence Unit (BFIU):
(1) In order to exercise the power and perform the duties vested in Bangladesh Bank
under section 23 of this Act, there shall be a separate unit to be called the
Bangladesh Financial Intelligence Unit (BFIU) within Bangladesh Bank.
(2) For the purposes of this Act, the governmental, semi-governmental, autonomous
organizations or any other relevant institutions or organizations shall, upon any
request or spontaneously, provide the Bangladesh Financial Intelligence Unit with
the information preserved or gathered by them.
(3) The Bangladesh Financial Intelligence Unit may, if necessary, spontaneously
provide other law enforcement agencies with the information relating to money
laundering and terrorist financing.

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 (4) The Bangladesh Financial Intelligence Unit shall provide with information
relating to money laundering or terrorist financing or any suspicious transactions to
the Financial Intelligence Unit of another country on the basis of any contract or
agreement entered into with that country under the provisions of this Act and may
ask for any such information from any other country.

Responsibilities of the reporting

organizations in prevention of money
laundering:
1. The reporting organizations shall have the following responsibilities in the prevention
of money laundering, namely:-

• to maintain complete and correct information with regard to the

identity of its customers during the operation of their accounts;

• if any account of a customer is closed, to preserve previous

records of transactions of such account for at least 5(five) years
from the date of such closure;

• to provide with the information maintained under clauses (a)

and (b) to Bangladesh Bank from time to time, on its demand;

• if any doubtful transaction or attempt of such transaction as

defined under clause (n) of section 2 is observed, to report the
matter as ‘suspicious transaction report’ to the Bangladesh
Bank immediately on its own accord.

2. If any reporting organization violates the provisions of sub-section (1), Bangladesh

Bank may-

• impose a fine of at least taka 50 (fifty) thousand but not exceeding taka
25 (twenty-five) lacks on the reporting organization; and

17
 in addition to the fine mentioned in clause (a), cancel the license or the
authorization for carrying out commercial activities of the said
organization or any of its branches, service centers, booths or agents, or
as the case may be, shall inform the registration or licensing authority
about the fact so as to the relevant authority may take appropriate
measures against the organization.

3. Bangladesh Bank shall collect the sum of fine imposed under sub-section (2) in such
manner as it may determine and the sum collected shall be deposited into treasury of the
State.

The Anti Money laundering department of

Bangladesh bank; prevention against
money laundering:
Although Bangladesh has taken many steps to prevent money laundering, it continues to be a
large problem within the country. On January 11, 2007, a caretaker government came to
power after declaring a state of emergency. Under the new government, there has been an
increase in the amount of funds laundered through the official banking system. As a response
to this, fighting corruption is now one of the main goals of the caretaker government in
power.
The main vulnerability for money laundering remains the use of the underground hawala or
“hundi” system, used to transfer money and valuables outside of the formal banking system.
The greatest use of the hundi system is to repatriate wages from expatriate Bangladeshi
workers. Although banks have recently increased their speed and efficiency in making
remittances, hundi remains a thriving system due to its ability to avoid taxes, customs duties
and currency controls.

To battle the problems of money laundering, the government enacted the Money laundering
prevention Act in 2002. Then, in 2007, the government enacted the UN Convention
against Corruption (UNCAC). Also in 2007, the government recognized the Central Bank’s
Anti-Money Laundering Department (AMLD) as the country’s official Financial Intelligence
18
Unit (FIU). In 2008, the government promulgated the Money Laundering Prevention
Ordinance (MLPO 2008) and the Anti-Terrorism Ordinance (ATO 2008). Both ordinances
facilitate international cooperation in battling money laundering, including working to
recover funds illegally transferred to or from foreign countries.

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 CHAPTER 3

Implications in
Bangladesh

20
In case of money laundering, Bangladesh actually follow the amended rule of 2012.But
further amendment also added to this act in 2015.According to the latest amendment money
laundering cases are settled down.

So now we will see some real life cases which will be heplpful to resemble the implication of
money laundering act in Bangladesh.

Real life Cases

BB HEIST 2016
$951 million. Exactly this is the amount that has been attempted to steal from Bangladesh Bank by
the hackers. This much of amount has been attempted to steal from the Bangladesh central bank's
account with the Federal Reserve Bank of New York within February 4 to 5. At that time, Bangladesh
Bank were closed. The perpetrators managed to compromise Bangladesh Bank's system, to observe
how transfers are done, and gained access to the bank's credentials for payment transfers, which
they used to send about three dozen requests to the Fed Bank to transfer funds to Sri Lanka and the
Philippines. 35 transactions worth $851 million transfer were prevented by the banking system but
five requests were granted; $20M to Sri Lanka and $81 million lost to the Philippines, entering the
Southeast Asian country's banking system on February 5, 2016. This money was laundered through
casinos and some later transferred to Hong Kong.

Sri Lanka Events

The $20 million fund to Sri Lanka, was intended by hackers to be transferred to Shalika Foundation, a
Sri Lanka-based non-profit organization. The hackers misspelled "foundation" in their request to
transfer the funds, spelling the word as "fandation". This spelling error gained suspicion
from Deutsche Bank, a routing bank which put a halt to the transaction in question after seek
clarifications from Bangladesh Bank.

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Philippine Events

The money transferred to the Philippines was deposited in five separate accounts with the Rizal
Commercial Banking Corporation (RCBC), and later found to be deposited under fictitious identities.
The funds were then transferred to a foreign exchange broker to be converted to Philippine pesos,
returned to the RCBC and consolidated to an account of a Chinese-Filipino businessperson. The
conversion was made from February 5 to 13, 2016.NThe four U.S. dollar accounts involved were
earlier opened with the RCBC in May 15, 2015, which remained untouched until February 4, 2016.

In February 8, 2016, during the Chinese New Year, Bangladesh Bank through SWIFT informed RCBC
to stop the payment, refund the funds and to "freeze and put the funds on hold" if the funds had
been transferred. Chinese New Year is a non-working holiday in the Philippines, and a SWIFT
message from Bangladesh Bank containing a similar information was received by RCBC a day later.
By this time, a withdrawal amounting to about $58.15 million was already processed by RCBC's
Jupiter Street Branch.

The Governor of Bangladesh Bank requested Bangko Sentral ng Pilipinas assistance on February 16
regarding the recovery of its $81 million funds saying that the SWIFT payment instructions issued in
favor of RCBC in February 4, 2016, to be fraudulent.

Malware in Bangladesh Bank Software

DHAKA, Bangladesh--Hackers who last month stole more than $100 million from
Bangladesh's account at the Federal Reserve Bank of New York had been remotely
monitoring activity at the South Asian nation's central bank for several weeks and may have
breached as many as 32 computers at the bank, a report from private investigators said.The
hackers introduced malicious code, known as malware into the Bangladesh bank's server,
which allowed them to process and authorize the transactions, according to an interim report
from FireEye Inc.

Resignation from Bangladesh Bank Governor

Bangladesh Bank Governor Atiur Rahman has resigned after this incident. Fazle Kabir, a
former finance minister, has been chosen as Rahman's replacement.

22
 Limitations
I. Limitations of the Financial System to
Money Laundering:
1. Money laundering is often thought to be associated solely with banks and
moneychangers. All financial institutions, both banks and non-banks, are susceptible
to money laundering activities. Whilst the traditional banking processes of deposit
taking, money transfer systems and lending do offer a vital laundering mechanism,
particularly in the initial conversion from cash, it should be recognized that products
and services offered by other types of financial and non-financial sector businesses
are also attractive to the launderer. The sophisticated launderer often involves many
other unwitting accomplices such as currency exchange houses, stock brokerage
houses, gold dealers, real estate dealers, insurance companies, trading companies and
others selling high value commodities and luxury goods.

2. Certain points of vulnerability have been identified in the laundering process, which
the money launderer finds difficult to avoid, and where his activities are therefore
more susceptible to being recognized. These are:
• Entry of cash into the financial system;
• Cross-border flows of cash; and
• Transfers within and from the financial system.

3. Financial institutions should consider the money laundering risks posed by the
products and services they offer, particularly where there is no face-to-face contact
with the customer, anddevise their procedures with due regard to that risk.

4. Although it may not appear obvious that the products might be used for money
laundering purposes, vigilance is necessary throughout the financial system to ensure
that weaknessescannot be exploited.

23
5. Banks and other Financial Institutions conducting relevant financial business in liquid
products are clearly most vulnerable to use by money launderers, particularly where
they are of high value. The liquidity of some products may attract money launderers
since it allows them quickly and easily to move their money from one product to
another, mixing lawful and illicitproceeds and integrating them into the legitimate
economy.

6. All banks and non-banking financial institutions, as providers of a wide range of

money transmission and lending services, are vulnerable to being used in the layering
and integrationstages of money laundering as well as the placement stage.

7. Electronic funds transfer systems increase the vulnerability by enabling the cash
deposits to beswitched rapidly between accounts in different names and different
jurisdictions.
8. However, in addition, banks and non-banking financial institutions, as providers of a
wide range of services, are vulnerable to being used in the layering and integration
stages. Other loanaccounts may be used as part of this process to create complex
layers of transactions.

9. Some banks and non-banking financial institutions may additionally be susceptible to

the attention of the more sophisticated criminal organizations and their “professional
money launderers”. Such organizations, possibly under the disguise of front
companies and nominees, may create large scale but false international trading
activities in order to move their illicit monies from one country to another. They may
create the illusion of international trade using false/inflated invoices to generate
apparently legitimate international wire transfers, and may use falsified/bogus letters
of credit to confuse the trail further. Many of the front companies may even approach
their bankers for credit to fund the business activity. Banks and nonbanking financial
institutions offering international trade services should be on their guard forlaundering
by these means.

10. Investment and merchant banking businesses are less likely than banks and money
changersto be at risk during the initial placement stage.

24
11. Investment and merchant banking businesses are more likely to find them being used
at the layering and integration stages of money laundering. The liquidity of many
investment products particularly attracts sophisticated money laundering since it
allows them quickly and easily to move their money from one product to another,
mixing lawful and illicit proceeds andintegrating them into the legitimate economy.

12. Although it may not appear obvious that insurance and retail investment products
might be used for money laundering purposes, vigilance is necessary throughout the
financial system toensure that nontraditional banking products and services are not
exploited.

13. Intermediaries and product providers who deal direct with the public may be used at
the initial placement stage of money laundering, particularly if they receive cash.
Premiums on insurance policies may be paid in cash, with the policy subsequently
being cancelled in order to obtain a return of premium (e.g. by cheque), or an insured
event may occur resulting in a claim being paid out. Retail investment products are,
however, more likely to be used at the layering and integration stages. The liquidity of
a mutual funds may attract money launderers since it allows them quickly and easily
to move their money from one product to another, mixing lawful andillicit proceeds
and integrating them into the legitimate economy.

14. Lump sum investments in liquid products are clearly most vulnerable to use by money
launderers, particularly where they are of high value. Payment in cash should merit
further investigation, particularly where it cannot be supported by evidence of a cash-
based business asthe source of funds.

15. Insurance and investment product providers and intermediaries should therefore keep
transaction records that are comprehensive enough to establish an audit trail. Such
records can also provide useful information on the people and organizations involved
in launderingschemes.

16. Corporate vehicles trust structures and nominees are firm favorites with money
launderers as a method of layering their proceeds. Providers of these services can find
themselves much indemand from criminals.
25
 17. The facility with which currency exchanges can be effected through a bureau is of
particularattraction especially when such changes are effected in favor of a cheque or
gold bullion.

II. Limitations of Products and Services:

Factoring
In international factoring there is a provision that the two firms must be member of Factor
Chain
International or some association that can ensure the credit worthiness of the firms. In
absence of thiskind of private sector watchdog in the local factoring, the supplier and the
buyer may ally together tolegalize their proceeds of crime. Without conducting any bonafide
transaction the supplier may getfinance from FIs and FIs may get repayment from buyer. FIs
may focus on getting repayment withoutconsidering the sources of fund which can be taken
as an opportunity by the money launderer to placetheir ill-gotten money. In the under
mentioned cases, Money Laundering may be happened occasionallyout of usual/valid
transactions. These may as under:

a) Lease/Term Loan Finance: Front company can take lease/term loan finance from a
financial institution and repay the loan from illegal source, and thus bring illegal
money in the formal financial system in absence of proper measures. The firm can
also repay the loan amount even before maturity period if they are not asked about the
sources of fund. In case of financial or capital lease, the asset purchased with FI‘s
financing facility can be sold immediately after repayment of the loan through illegal
money and sold proceeds can be shown as legal. So the money launderers and
terrorist financer can use this financial instrument for placement and layering of their
ill-gotten money.

b) Private Placement of Equity/Securitization of Assets: Some FIs offer financing

facilities to firms through private placement of equity and securitization of assets. FIs
sell those financial instruments to private investors who may take this as an

26
 opportunity to make their money legal. Later the money launderers can sell these
instruments and bring their money in the formal financial system.

c) Personal Loan/Car Loan/Home Loan: Any person can take personal loan from FIs
and repay it by illegally earned money; thus he/she can launder money and bring it in
the formal channel. After taking home loan or car loan, money launderers can repay
those with their illegally earned money, and later by selling that home/car, they can
show the proceeds as legal money.

d) SME/Women Entrepreneur Loan: Small, medium and women entrepreneurs can

take loan facilities from FIs and in many cases, repayment may be done by the
illegally earned money. They even do so only to validate their money by even not
utilizing the loan. This way they can bring the illegal money in the financial system.

e) Deposit Scheme: FIs can sell deposit products with at least a six months maturity
period. However, the depositor can encash their deposit money prior to the maturity
date with prior approval from Bangladesh Bank, foregoing interest income. This
deposit product may be used as lucrative vehicle to place ill-gotten money in the
financial system in absence of strong measures.

f) Loan Backed Money Laundering: In the “loan backed” money laundering method,
a criminal provides an associate with a specificamount of illegitimate money. The
associate then provides a “loan or mortgage” back to the moneylaundering for the
same amount with all the necessary “loan or mortgage” documentation. This createsan
illusion that the trafficker‘s funds are legitimate. The scheme is reinforced through
“legislatively”scheduled payments made on the loan by the money launderer.

III. Structural limitations:

✓ FIs are yet to develop sufficient capacity to verify the identity and source of funds of
their clients.
✓ The human resources are not skilled and trained enough to trace money laundering
and terroristfinancing activities.
✓ None of the FIs has Anti Money Laundering software to monitor and report
transactions of asuspicious nature to the financial intelligence unit of the c
27
 Recommendations

Money laundering has potentially devastating economic, security, and social consequences.
Money laundering is a process vital to making crime worthwhile. It provides the fuel for drug
dealers, smugglers, terrorists, illegal arms dealers, corrupt public officials, and others to
operate and expand their criminal enterprises. Money laundering diminishes government tax
revenue andtherefore, indirectly harms honest taxpayers. It also makes government tax
collection more difficult. In order to combat Money Laundering:
➢ Banks should at all times pay particular attention to the fundamental principle of
good business practice “know your customer (KYC)”. Having a sound knowledge of
a customer’s business and pattern of financial transactions and commitments is one
of the best methods by which Bank and its Officials will recognize attempts at money
laundering. Itis not only a principle of good business but is also an essential tool to
avoid involvement in moneylaundering.

➢ Thus efforts to combat money laundering largely focus on those points in the process
where thelaunderer's activities are more susceptible to recognition and have therefore
to a large extentconcentrated on the deposit taking procedures of banks i.e. the
placement stage.

➢ Institutions and intermediaries must keep transaction records that are comprehensive
enough toestablish an audit trail. Such records can also provide useful information on
the people andorganizations involved in laundering schemes.

28
 Conclusion

So we see the definition of money laundering act,impact on developing countries like us and
the limitations of recent act against money laundering and some recommendations.

Ultimately how to control money laundering has been described.By following these steps it
is expected that “Money Laundering”which is the recent world concern can be solved.

29
CHAPTER 4

Appendix

30
Sources:
1. Managing corerisks in banking: Guidance notes on prevention of money laundering,
Bangladesh Bank.
2. Updated Manual (Guidelines) on prevention of money laundering and combating
financing on terrorism: 2013, Bank Asia.
3. Guidelineson preventionofmoneylaundering (Revised-2014), IFIC Bank.
4. Anti-money laundering Act-2012 of Bangladesh.

31