Bangladeshi firms veiled in secrecy

Bangladesh has ranked 54th out of 133 nations in the Financial Secrecy Index (FSI) 2020, with a score of 72.73, based on the country's high secrecy over jurisdiction and offshore financial services. 

The score indicates how intensely Bangladesh's legal and financial systems allow wealthy individuals and criminals to hide and launder money, according to the study by Tax Justice Network (TJN) published on Tuesday.

The independent international network aims to rank countries' jurisdiction on financial activities in their biennial publication the FSI. This is the first time the TJN has ranked Bangladesh in their report.

The index measures different jurisdiction's contribution to global financial secrecy in a way that highlights harmful secrecy regulations. A hundred score means high secrecy and zero means high transparency.

In today's world, organised crime, bribery, terrorism and large-scale tax evasion is a very common phenomena. Offshore bank accounts and financial investments are a popular way to stash illegal money. 

Many countries attract those investors by their accommodating and poorly transparent jurisdiction. Sometimes, illegal and laundered money easily lands in those countries, due to the absence of proper cross border cooperation and jurisdiction.

The FSI 2020, which is the sixth edition of the study, revealed that the financial secrecy around the world has decreased by 7 percent as a result of recent transparency reforms. 

Very Low Legal Entity Transparency

The FSI consists of 20 Key Financial Secrecy Indicators in four Key Indicator Categories – Ownership registration, Legal entity transparency, Integrity of tax and financial regulation, and international standards and cooperation. 

Bangladesh maintains very high secrecy in Legal entity transparency, achieving a mean score of 95 out of 100. The country has a very tiny share of the global offshore market compared to global average. 

There is a significantly low amount of banking or industrial anonymous offshore investments. 

Bangladesh has only 0.02 percent share of total global offshore financial service market. 

Sadly, the country's domestic legal entities maintain a very poor transparency, which in turn resulted in Bangladesh achieving 9 points higher than the average secrecy score.

Bangladesh has zero transparency in public company ownership, accounts, country-by-country reporting and legal entity identifier.

On an important note, no domestic company is under any jurisdiction to be transparent about their beneficial and legal ownership information.

Which means, the domestic companies are not legally bound to publically release information about their ownership, accounts and country by country financial report and legal entity data on a regular basis.

Swiss banks no longer safe havens

In the previous four FSI reports from 2011 to 2018, Switzerland topped the ranking for being a safe haven for parking illegal money. 

However, the current report sees the Cayman Islands and the United States ranked as the top two enablers of financial secrecy in the world. Switzerland has dropped down to the third biggest enabler of financial secrecy in the world.

The UK makes the biggest jump towards secrecy. The previous report in 2018, the UK scored 42.3 but in current edition they score 46.2. Cook Islands, St Lucia and Nauru stand at the bottom in the index. 

South Asia has only 3 percent Global Offshore Market Share

Five South Asian countries are mentioned in the report. Sri Lanka topped the chart in this region by ranking 39th. 

Bangladesh is 3rd, following Sri Lanka and India. Pakistan has the lowest level of financial secrecy with a rank of 100th, while Maldives ranked 74th.

The South Asian countries have a minimum global market for offshore financing. Only India has just more than 1 percent share of global offshore financing. The other four countries have below 0.04 percent share.

South Asian Countries are the reason behind only 3 percent financial secrecy across the world while member countries of the Organisation for Economic Co-operation and Development has the highest share of secrecy, which is around 49 percent.

TIB's opinion on the report

Speaking to The Business Standard, Transparency International Bangladesh (TIB) Executive Director Dr Iftekharuzzaman said, "A large number of organisations of some sectors are involved in the issues identified by the Tax Justice Network. 

"Mainly the private sector is involved in such incidences, but at the same time government regulatory authority or enforcement authority are also involved. Despite possessing many strengths, the enforcement authorities have some weaknesses."

He pointed out that the most important matter is the lack of transparency regarding beneficial ownership in Bangladesh, as often the real ownership of a company remains unknown. 

Dr Iftekharuzzaman further said, "So, to overcome this situation, first we need to strengthen the regulatory system. Second, the related organisations such as the National Board of Revenue and other organisations have to increase their supervision.

"Financial information is becoming increasingly digitised. The banking transactions can be automated now. However, Bangladesh is not benefitting fully from the digitisation of information."

He continued, "Under an automatic information sharing system, the authorities can make an arrangement between the banking system and the corporations so that information will be shared instantly with all the regulatory bodies such as the Bangladesh Bank, NBR, and the international ones."