Bangladesh Bank cut money laundering via over-invoicing by 90%, says Governor Rouf

The governor clarifies that only a small fraction of the laundered funds involves pocketed dollars, primarily through trade misinvoicing

Bangladesh Bank has been able to prevent “90 percent” of money laundering through over-invoicing, according to Governor Abdur Rouf Talukder. 

A significant portion of the money is illicitly transferred out of the country via business channels, he said during a programme in Dhaka on Monday. 

The governor explained that only a small portion of the total funds smuggled out of the country involves pocketed dollars. 

The primary method is through trade-based money laundering via misinvoicing, he said. 

“For instance, if a product's actual price is $100, someone might manipulate the LC to show the price at $150, thus smuggling the extra $50." 

He added that some exporters leave their export earnings abroad, which is also considered money laundering. 

Economists have long been pointing to misinvoicing, in which product prices are shown higher or lower to launder money. Dishonest importers show higher prices of goods and collect the extra money from the exporters abroad by using over-invoicing. 

In under-invoicing, some exporters show lower prices of goods and collect the extra money from the importers in the recipient country. 

International studies have shown huge amounts of money are smuggled out of Bangladesh through the banking channel by using misinvoicing. 

A study by Washington-based Global Financial Integrity said at least $8 billion were laundered from Bangladesh from 2004-2013 through non-transparent means, or misinvoicing. 

Rouf recalled the crisis sparked by money exchanges raising the dollar price at the end of 2022. 

He noted that while these exchanges trade around $45 to $50 million annually, it is a small fraction compared to the $270 billion transacted in the banking system. 

The governor added, "There's no longer any discussion about the dollar rates at money exchanges. It's not even in the newspapers. When there's no news, it means everything is stable." 

Preventing 100 percent of over-invoicing is unrealistic, he said. 

“The aim is to stop 90 percent of it, which is considered satisfactory. Currently, we have successfully reduced over-invoicing by 90 percent.” 

Banks are now more vigilant in issuing letters of credit, and additional measures have been put in place to verify prices beforehand, he said.