This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 DHAKA 006194 
 
SIPDIS 
 
STATE FOR INL, SCA AND EB/ESC/TFS 
JUSTICE FOR OIA AND AFMLS 
TREASURY FOR FINCEN 
 
E.O. 12958: N/A 
TAGS: EFIN KCRM KTFN PTER SNAR BG
SUBJECT: 2006 INSCR PART II - BANGLADESH 
 
REF: STATE 210691 
 
The text of Post's 2006 INCSR Part II submission, requested 
reftel, is set forth below: 
 
Bangladesh 
 
Bangladesh is not an important regional financial center. 
There are no indications that substantial funds are laundered 
through the official banking system. The principal money 
laundering vulnerability remains the widespread use of the 
underground hawala or "hundi" system to transfer value 
outside the formal banking network. The vast majority of 
hundi transactions in Bangladesh are used to repatriate wages 
from Bangladeshi workers abroad. However, as elsewhere, the 
hundi system is also used to avoid taxes, customs duties and 
currency controls and as a compensation mechanism for the 
significant amount of goods smuggled into Bangladesh. 
Traditionally, trade goods provide counter valuation in hundi 
transactions. 
 
An estimated $1 billion dollars worth of dutiable goods is 
smuggled every year from India into Bangladesh. A 
comparatively small amount of goods is smuggled out of the 
country into India. Instead, hard currency and other assets 
flow out of Bangladesh to support the smuggling networks. 
Corruption is a major area of concern in Bangladesh. The 
non-convertibility of the local currency (the taka) coupled 
with intense scrutiny on foreign currency transactions in 
formal financial institutions also contribute to the 
popularity of both hundi and black market money exchanges. 
Money exchanges outside the formal banking system are 
illegal. Offshore financial accounts are not permitted in 
Bangladesh. During the last year, there has been a 
significant increase in the amount of money transferred 
through the formal banking system as a result of the efforts 
by the Bangladesh Government to increase the efficiency of 
the process. 
 
Bangladeshis are not allowed to take more than 3,000 taka 
(approximately $50) out of the country. There is no limit as 
to how much currency can be brought into the country, but 
amounts over $5,000 must be declared. Customs is primarily a 
revenue collection agency, accounting for 40-50 percent of 
annual Bangladesh government income. 
 
Since 2004, the central Bank, Bangladesh Bank (BB) has 
conducted training for every bank's headquarters around the 
county in "know your customer" practices. Since Bangladesh 
does not have a national identify card and because most 
Bangladeshis do not have a passport, there are difficulties 
in enforcing customer identification requirements. In most 
cases, banking records are maintained manually with little 
support technology, although this is changing, especially in 
head offices. Accounting procedures used by the Bangladesh 
Bank may not in every respect achieve international 
standards. 
 
In 2004, the Bangladesh Bank issued "Guidance Notes on 
Prevention of Money Laundering" and designated effective 
anti-money laundering compliance programs as a "core risk" 
subject to the annual bank supervision process of the 
Bangladesh Bank. Banks are required to have an anti-money 
laundering compliance unit in their head office and a 
designated anti-money laundering compliance officer in each 
bank branch. The Bangladesh Bank conducts regular training 
programs for compliance officers based on the guidance notes. 
 In December, 2005, the central bank brought all compliance 
officers to Dhaka for a discussion about their obligations 
and heightened police interest in money laundering and 
terrorist financing. 
 
Currently, Bangladesh does not have a Financial Intelligence 
Unit (FIU) per se. However, under the 2002 Money Laundering 
Prevention Act (MLPA), the Anti-Money Laundering Unit (AMLU) 
of Bangladesh Bank acts as a de facto FIU and has authority 
to freeze assets without a court order and seize them with a 
court order. As noted below, this will soon be remedied.  The 
Bangladesh Bank has received 45 suspicious transaction 
reports in 2005 to make a total of 193 suspicious transaction 
reports since the MLPA was passed in 2002. By 2004, 134 were 
resolved without further action.  The remaining reports were 
transferred from the now defunct Bureau of Anti-Corruption to 
the newly created Anti-Corruption Commission (ACC).  The ACC 
has advised the bank that they will not investigate these 
cases and stated it will send the files back to the bank by 
December 31, 2005.  Currently, there are 29 cases pending 
with the Criminal Investigation Division of Bangladesh Police 
Headquarters which Bangladesh Bank referred to them after the 
ACC abruptly refused to investigate. 
 
There have been important developments in 2005 in the 
anti-money laundering and terrorist financing arena.  A new 
law, The Anti-Money Laundering and Terrorist Financing Act 
2005 (AMLTF), has been drafted to replace the 2002 Money 
Laundering Prevention Act (MLPA). It will be presented to the 
cabinet for approval in mid-December 2005.  After Cabinet 
approval it will be vetted by the Law Ministry and then 
presented to Parliament. The current draft addresses most of 
the shortcomings noted in last year's report. 
 
AMLTF criminalizes terrorist financing. It provides powers 
required for a an FIU to meet international recommendations 
set forth by Financial Action Task Force (FATF) including 
sharing information with law enforcement at home and abroad. 
The new legislation also provides for the establishment of a 
Financial Investigation and Prosecution Office wherein law 
enforcement investigators and prosecutors will work as a team 
from the beginning of the case to trial.  The 2005 
legislation also addresses asset forfeiture and provides that 
assets, substitute assets (without proving the relation to 
the crime) and instrumentalities of the crime can be 
forfeited.  The legislation does not address the nuts and 
bolts of asset forfeiture which BB claims can be done 
administratively and via regulatory procedures. 
 
Another major development is that Bangladesh has signed and 
ratified the UN International Conventions for the Suppression 
of the Financing of Terrorism. The government is now party to 
the 12 UN Conventions on Terrorism. The 13th 
terrorist-related convention was announced by the UN last 
summer and is under consideration.  Bangladesh has not signed 
the convention against Transnational Organized Crimes. 
Bangladesh is a party to the 1988 UN Drug Convention, and is 
a member of the Asia/Pacific Group on Money Laundering. 
 
As mentioned earlier, Bangladesh does not have a law that 
makes terrorist financing a crime though one has been drafted 
for Cabinet approval. In 2003, Bangladesh froze a nominal sum 
in an account of a designated entity on the UNSCR 1267 
Sanctions Committee's Consolidated List and identified an 
empty account of another entity. In 2004, following 
investigation of the accounts of an entity listed on the 
UNSCR 1267 consolidated list, Bangladesh Bank fined two local 
banks for failure to comply with Bangladesh Bank regulatory 
directives. 
 
Despite advancements and demonstrable political will to 
address shortcomings in the money laundering and terrorist 
financing regime, lack of training, resources, computer 
technology including computer links with the outlying 
districts continue to hinder the necessary progress. Further 
crippling efforts is the staggering degree of corruption that 
merits Bangladesh's last place position in Transparency 
International's Index for the last four years. 
CHAMMAS