The Role of Banking Sector in the Prevention of Money Laundering in Bangladesh

Topics: Bank, Money laundering, Bank Secrecy Act Pages: 75 (23766 words) Published: March 27, 2013

Chapter One


Besides of development of Economic activities, monetary related crimes are also increasing in both developed and underdeveloped countries. Almost in each country illegal transaction of money has been increased & these illegal money has been also used on various illegal activities.

Money laundering process refers to illegal receipt or transfer of fund from one place to another. This process involves not only the banking system of the country but also non-banking system. Bangladesh is moving towards an open economy with a small-magnetized sector by liberalizing the financial and economic policies. However, the money laundering mechanisms are creating problem for a country like Bangladesh.

Bangladesh Bank as the Central bank of Bangladesh Supervise all the banking and non-banking financial transactions on behalf of Bangladesh Government. Money laundering process is a great obstacle to the execution of monetary policy adopted by Bangladesh bank to stable the economy of the country. To prevent money laundering, money laundering prevention bill 2002 was passed in the National Assembly of Bangladesh on 5 April 2002 and Gazette Notification was made on 7 April 2002. And Bangladesh Bank has been designated to act as the main preventive agency. Money Laundering has serious adverse effect on Economical, Political & Social condition of a country. It increases unequal distribution of income and as a result, the employment level, output level of the country, price stability as well as economic development and growth can be hampered. So it is immediately required to prevent it.

I believe it is a matter of great opportunity for me to study on this topic, as Money laundering, is a manifestation and a facilitator of organized crime, and has attracted increasing interest in our country. Due to money laundering process, desirable investment of the country cannot be done, national income declines and economic growth of the country hampers.

1. Background of Money Laundering

The mafia mobster Al Capone is most often credited with coining term “money laundering” because he used investments in coin-operated Laundromats to disguise or “wash” the millions he made from bootlegging and other illegal enterprises during the Prohibition in the US-the banning of alcoholic drinks in the 20th century. It is also said that the term “laundering” is used because, years ago, the cash proceeds (in U.S. dollars) from drug sales were actually washed with soap and water to appear old and worn. Launderers would then go to the Federal Reserve Bank and exchange the “laundered” bills in for new bills. Along with the new bills came a fed receipt, which served to support the “legitimate” origin of the cash. The scam was finally identified when someone at the Fed realized that the serial numbers on the bills indicated that they should not be as old and worn as they appeared to be. The term first appeared in newspapers reporting the Watergate scandal in the US in 1973 and in judicial/legal contest in the US in 1982. Whilst the term “money laundering” was coined in the 20th century, it has been going on for several thousand years. The history of money laundering is interwoven with the history of trade and of banking. In 1986, the U.S. became the first country in the world to criminalize the “laundering” of the proceeds of criminal activity when it passed the U.S. money laundering law. The silk road which scholars say first became a real link around 100 BC, ran for 12,000 kilometers and linked some of the greatest civilizations the world has ever seen – the Chinese, Mongolian, Indian, Persian, Greek, Byzantine, Mesopotamian and Egyptian – transporting goods, people, ideas, religions and Money. Chinese inventions like gunpowder and paper first traveled to Europe in this manner. Along with many other things, Syrian jugglers and acrobats, cosmetics, silver, gold, amber, ivory, carpets, perfume and glass...

References: ➢ Bangladesh Gazette on Money Laundering Prevention Act-2002 and its amendment on 27 February 2003.
➢ FATF, 2003, Financial Action Task Force on Money Laundering – The Forty Recommendations, http://
➢ Quirk, Peter, 1996,” Macroeconomic Implications of Money laundering”, IMF working paper No. 96/66.
➢ Khan, Murshid Kuli, 1999, “Money Laundering”, Bank Parikrama, Vol.XXIV, No.2.
➢ Khan, Murshid Kuli, 2002, “Money Laundering”, a paper presented in the seminar of the Institute of Bankers, Bangladesh (IBB) held on 30th October, 2002.
➢ Smetanka, J. A. “Money Laundering in Bangladesh.” A Paper presented at a seminar organized by BIBM and American Express Bank on March 11,2000.
➢ Ali, Muhammad Mahboob, Journal of IBB, Vol.50, No. 2 Dec.-2003, PP 137-154. Institute of Bankers, Bangladesh.
➢ Md. Harunur Rashid Chowdhury, GM, Anti-Money Laundering Department, Bangladesh Bank, Dhaka, “Money Laundering: An overview & general idea in the context of Money Laundering Prevention Act, 2002”.
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