Why cash transactions still remain popular. Here is what BFIU finds

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Despite substantial advancements in digital payment methods and financial services over the past decade, cash transactions have continued to increase over the last five years, indicating their enduring popularity, notes the Bangladesh Financial Intelligence Unit (BFIU) in its annual report for the fiscal year 2022-23.

Unveiling the report at a press conference at the Bangladesh Bank headquarters on Tuesday (20 February), the BFIU said cash transactions remain prevalent due to their anonymity and the challenge of tracing their origin and destination, making them conducive to money laundering

Both the frequency and volume of cash transactions continued to rise, despite the central bank's efforts to implement the vision of a "Cashless Bangladesh" by aiming to transition 75% of the country's transactions to cashless methods by 2027.

The report shows that in FY23, overall cash transactions amounted to Tk22.86 lakh crore, marking an 8% increase from the previous fiscal year. The number of transactions rose by nearly 5% year-on-year to reach 3.8 crore.

The BFIU conducts annual trend analyses on cash transactions of Tk10 lakh or more on a threshold basis.

The BFIU analysis shows that around 80% of all cash transactions occurred through entity accounts, with the remaining 20% attributed to individuals.

During FY23, cash transactions through personal accounts totalled Tk4.46 lakh crore, while those through entity accounts amounted to Tk18.39 lakh crore.

The majority of cash transactions, comprising 37.66% of the total, fell within the range of Tk10 lakh to Tk25 lakh. Transactions ranging from Tk25 lakh to Tk50 lakh made up 16.38% of the total, while those between Tk50 lakh and Tk1 crore accounted for 10.77%. Transactions exceeding Tk1 crore constituted 9.23% of the total, according to the report.

Analysing cash transaction volumes by geographical regions reveals that Dhaka division recorded the highest amount of cash transactions, comprising 57% of the total volume. In contrast, Chattogram division ranked second, accounting for 16% of the total. Sylhet and Barishal divisions each contributed the lowest share of 2%.

In the report, the BFIU explained the factors driving up cash transactions, citing traditional criminal activities such as corruption, fraud, forgery, drug dealing, extortion, sexual exploitation, hundi, and human trafficking as significant sources of cash proceeds.

Furthermore, alongside traditional crimes, emerging threats stem from modern technologies such as virtual currencies, online gaming, betting, forex, and cryptocurrency trading, where cash serves to conceal the illicit origin of the proceeds.

The report noted that despite the government's introduction of new digital payment ecosystems aimed at encouraging cashless transactions, the use of cash has seen a greater increase compared to previous years, coinciding with the growth of the economy.

Suspicious transaction reports rise by 65%

According to the report, the Bangladesh Bank observed a 65% increase in the number of suspicious financial transaction reports in the last fiscal year, attributed to the surge in fraudulent activities within online-based platforms, including online gambling, cryptocurrency trading, and digital hundi.

Additionally, the report revealed a 30% rise in requests for financial information to the BFIU from law enforcement agencies and intelligence agencies during the fiscal year.

The report highlighted primary predicate offences associated with illicit financial activities, encompassing corruption and bribery, forgery, fraud, currency smuggling, and human trafficking.

During FY23, the BFIU received a total of 14,106 Suspicious Transaction Reports and Suspicious Activity Reports from relevant agencies, said BFIU Chief Masud Biswas at the press conference.

The total number of Suspicious Transaction Reports and Suspicious Activity Reports was 8,571 in FY22.

However, Kamal Hossain, additional director of BFIU, said, "The increase in Suspicious Transaction Reports and Suspicious Activity Reports does not necessarily indicate a rise in money laundering activities. It is due to the increase in digital financial transactions and enhanced monitoring by our unit."

According to the report, 12,809 of the suspicious activities of FY23 were recorded in the banks, accounting for 90.80% of all reports, while 900 were recorded in money transmitters and 121 in non-bank financial institutions.

Furthermore, in FY23, the BFIU received 1,075 information requests from diverse agencies. Among them, the Anti-Corruption Commission submitted the highest number, with 540 requests, followed by the National Board of Revenue with 95 and the Criminal Investigation Department with 64.