NGO/NPO sectors and Money Laundering in Bangladesh

 

By Asif Hasan Shatu

Non-Governmental Organizations (NGO) and Non-Profitable Organizations (NPO) have grown dramatically after independence. There are more than thousands of NGOs and NPOs are running their operations in Bangladesh.

According to the Association of Development Agencies in Bangladesh (ADAB) there were total 1175 NGOs in Bangladesh till 2013. They are actively playing role for socio economic development of Bangladesh and many other factors. As they have an objective to raise funds globally and use them in Bangladesh, they often do international transactions from Bangladesh in a large amount. Doubtlessly, the NGOs and NPOs have praiseworthy contribution all over the world in matters of establishing good governance, functioning of democracy, and upholding of human rights and fundamental freedoms. They have been also working against corruption, political partisanship and abuse of familial connections. But their activities are sometimes questioned by Financial Action Task Force (FATF), a global money laundering and terrorist financing watchdog.

Notwithstanding, Bangladesh is a founding member of Asia Pacific Group on Money Laundering (APG) formed by G-7 countries in 1989 and adopting state regulations against Money Laundering such as Money Laundering Prevention Act, 2012, still we have been witnessing  numerous incidents of  Money Laundering in Bangladesh.

In a Scenario, A domestic NPO with operations abroad was involved with small disaster relief projects, among other activities. Most of these disaster relief activities were not, however, reported in the information that the organization was obligated to provide annually to the national regulatory body. Relatively, they were discreetly included in the organization’s Zakat disbursement and were revealed only through an audit of the organization’s finances by the national regulatory body. Examples of these Zakat disbursements included several thousand dollars to three organizations for earthquake relief, relief of poverty, and religious education. An audit done on the NPO found that it exercised no control or accountability over the use of these funds once they were transferred. Some recipient organizations had been implicated in supporting terrorism and terrorist activities. The NPO was also under suspicion for using its Zakat and one other account for money laundering. The second account was used for collecting interest-free loans that the NPO received from its members. During an audit performed by the national regulatory body, irregularities were noted with the loans which suggested that the NPO was misusing the two accounts. A review of the information that the NPO was obligated to file annually revealed that for several years the amount of loans received by the organization was very close to the amount of loan repayments disbursed by the organization for the same fiscal period.

There are some reasons identified for increasing money laundering rate through NGOs and NPOs in Bangladesh. Firstly, NGOs in Bangladesh enjoy high levels of public trust because of their work in the areas like relief of the poor, education, medical relief and the advancement of any other object of general public utility. Secondly, NGOs in Bangladesh often have complex financial operations including multiple donors, investments and currencies, often receiving and using cash, having to account for high volume of small transactions and using informal money transfers. Thirdly, NGOs may have unpredictable and unusual income and expenditure streams, so suspicious transactions may be harder to identify.  As being a developing Country, the importance of NGOs and NPOs cannot be neglected in the sustainable and socio-economic development sector. On the other hand, it is also a matter of concern how money laundering sabotaged the economic growth of Bangladesh. And it is proved a bitter truth that only implementing law and rules is not sufficient to prevent money laundering. To tackle this, government should step ahead towards new policies. An independent and autonomous regulatory authority is needed to handle the funds and donations of NGOs and NPOs. They shall have to play regular audit over the NGOs and NPOs. All foreign transaction shall have to done through the mentioned authority. NGOs and NPOs shall have to make their budget break-down approved before starting any project. Nevertheless, NGOs, NPOs should be fined for not only involving in money laundering but also for any kind of suspicious activities.

  • Asif Hasan Shatu, is a student of LLB program at Department of Law and Human Rights, University of Asia Pacific.

UMSAILS UAP Spring School- 2022

Selected students from different law schools in Bangladesh, India and Bhutan participated in this program The South Asian Institute of Advanced Legal and Human Rights