Banks to set vessel tracker to fight money laundering

All scheduled banks are keen on introducing online vessel tracker to rein in trade-based money laundering committed through import-export activities.

The move came in compliance with the Bangladesh Financial Intelligence Unit (BFIU) directive to combat the siphoning off money as well as terrorism financing under the guise of ocean-going vessels.

According to the BFIU, 80 per cent illicit financial transactions and terrorism financing are trade-based.

It wants the banks introduce online tracker and ensure accountability in export-import activities.

An IT specialist at the Bangladesh Bank (BB) said the online vessel tracking system can trace L/C values, examine product specifications and prices at sourcing countries. Once mismatch is found through the device, agencies concerned have to investigate into the suspected trade frauds like under invoicing and over invoicing.

“Tracking device will help undertake investigation, or gives clues to trade frauds to regulatory authorities,” the IT expert, who is not authorized to talk to media, told The Business Post.

Investigations find that the money-laundering rings open an LC (Letter of Credit) by submitting counterfeit documents while some rogue bank officials are colluded with the entire process.

The BFIU Chief Abu Hena Mohammad Razee Hassan told The Business Post several banks have already set off vessel tracking system while others are in the pipeline.

“The anti-money laundering guidelines suggested that no bank can operate LC (Letter of Credit) activities without introducing this tracking system,” he said.

The Bangladesh Bank (BB) in December, 2019 asked all scheduled banks to launch the tracking software with their computer sets by June 1, 2020. The deadline was extended until June 30, this year as majority banks have not yet complied the system.

A recent meeting of anti-money laundering and terrorism financing taskforce, presided by convener of the taskforce Abu Hena Mohammad Razee Hassan, also former BB deputy governor, asked all banks to introduce the tracking system without further delay.

A letter of credit (LC) also known as a documentary credit is a payment mechanism used in international trade to provide an economic guarantee from a creditworthy bank to an exporter of goods.

Earlier on multiple occasions, the Customs Intelligence and Investigation Directorate (CIID) as well as the Chattogram Customs seized many consignment in the wake of their false declarations.

They found that most shipment arrive through over-, under- and multiple-invoicing and also entailing misrepresentation of products.

CIID in its probe has learnt that some Bangladeshi companies siphoned off a total of Tk 1,539 crore to Singapore and China through false declaration of shipment in 31 letters of credit from March to June 2021.

Of them M/S Henan Anhui Agro and Agro BD JP reportedly laundered Tk 874 crore through five LCs opened in the name of machinery import. But later cigarette, LED television, photo copier and foreign liquor were found literally instead of machinery.

M/S Henan Anhui Agro and Agro BD JP both had shown non-existent factory address at Keraniganj and Khilkhet in the capital.

A private bank allegedly permitted them to open LCs against counterfeit documents. Even the bank did not go for a field visit nor even did shipment monitoring.

Trade Finance is linked to maritime transportation of cross-border movement of goods, and therefore it has to face an increased scrutiny.

Foreign Exchange Operation Department, Foreign Exchange Policy Department and Department of Foreign Exchange Inspection are tasked with overseeing cross-border trade through scheduled banks.

Mutual Trust Bank Managing Director and CEO Syed Mahbubur Rahman said many exporters and importers resort to fraudulent means, which are prejudicial to the economy of the country.

“The BFIU has issued us directive to introduce the anti-money laundering tool. We welcome the decision. I think money laundering and terrorism financing will decrease from now on,” the seasoned banker pointed out.

The online ship tracker can track real time as well as know the company and the shipment history.

A user will receive an email notification about any adverse activity which will also be mirrored in compliance link.

The system makes sure that users have up-to-date and accurate information at hand to support their trade compliance efforts.

In addition, they can also add a number of vessels to their track portfolio and leave the product algorithm to get alertness on any rogue port visits if any.

According to a report by the US-based think-tank Global Financial Integrity released on March 2020, the average value of Bangladesh’s trade misinvoicing was 17.95 per cent of the country’s total trade.

Bangladesh ranked 33rd globally and 3rd in South Asia in terms of illicit outflow of money through trade misinvoicing.

Unrecorded capital flow from Bangladesh stood at $ 61.63 billion between 2005 and 2014, riding mostly on misinvoicing while in 2015 it was $ 5.9 billion, as per the report.

Former Director General of CIID Moinul Khan told The Business Post money-laundering rings submit counterfeit export proceed Realisation Certificate to banks and government authorities.

Thus goods or items are not imported as per the invoice; around 80 per cent money laundering occurs through trade-based system, he said.

“If the BB or BFIU can mandatorily introduce the ship tracking system, illegal currency or terrorism financing will decrease,” he suggested.

According to sources in Chattogram Customs, a total of 45 licences of clearing and forwarding agents have been canceled so far this year since they were involved dealing with false export-import activities.

Several agents had been fined while a host of exporters and importers faced legal action but this trend did not come to an end.

Vessel tracking software monitors the movements of ships, boats, and other marine vessels. Vessel tracking software displays the real-time positions of vessels on a map and information about each watercraft using radio signals from the automatic identification system (AIS) transponders located on each vessel, another expert said.

Businesses, ports, governments, and others use vessel tracking software to keep track of ships that carry cargo between ports worldwide, he added.

“Vessel tracking software can help businesses keep tabs on the status of shipments, plan the most efficient voyages, and be informed about maritime emergencies. Government officials use these tools for enforcing maritime regulations, search and rescue missions, and national security planning. The insights provided by vessel tracking software can help businesses more efficiently manage their global maritime shipping operations,” the IT expert at the BB elaborated.