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In what seems a logical culmination of events, Bangladesh has been given time until February 2013 to address deficiencies in its fight against money-laundering and terror-financing to avert black-listing by the Financial Action Task Force (FATF). The deadline was set at the FATF meeting held at Paris between October 15 and 19, 2012. FATF is an inter-governmental body established in 1989 with the objectives of setting standards and promoting effective implementation of legal, regulatory and operational measures for
combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.
Under this mandate, Bangladesh needs to adequately address the issue of criminalising terror financing and establish and implement procedures to identify and freeze terror assets, and to remove deficiencies in its anti-money laundering (AML) legislation and apparatus, to effectively combat the financing of terrorism.
After the FATF meeting, one of the members of the four member team from Bangladesh, headed by Additional Finance Secretary, Ranjit Kumar Chakraborty, stated, on October 22, 2012, “We are making preparations for addressing these deficiencies within the timeframe, set by the FATF… The Government may consider amending the existing Anti-Terrorism Act in line with the global standard to adequately address criminalizing terror financing.” Earlier, in 2009, Bangladesh promulgated the Anti-Terrorism Act, including provisions to tighten controls on terrorist financing in the country.
Internationally, the financing of terrorism was criminalized under the United Nations International Convention for the Suppression of the Financing of Terrorism, in 1999. To reinforce the 1999 Convention, the United Nations adopted UNSC Resolutions 1373 and 1390, directing member states to criminalize terror finance and adopt regulatory measures to detect, deter and freeze terrorists’ assets. The resolutions oblige all states to deny financing, support and safe harbour to terrorists.
Unfortunately, despite these conventions and resolutions, the U.S. Senate Permanent Subcommittee on Investigation, in its July 17, 2012, report titled U.S. Vulnerabilities to Money Laundering, Drugs and Terrorist Financing: HSBC Case History, disclosed that two Bangladesh-based banks, Islami Bank Bangladesh Limited (IBBL) and Social Islami Bank Limited (SIBL) were involved in terror financing. Regarding the functioning of HSBC, it was mentioned that the bank acted as a financier to clients seeking to route funds from countries like Mexico, Iran, Saudi Arabia, Syria, North Korea, Cuba, Sudan, Myanmar, Japan and Russia. The report also stated that the HSBC supplied dollars to IBBL and SIBL, ignoring evidence of their links to terror financing. HSBC did not submit these two banks to enhanced monitoring for suspicious transactions, despite recommendation by HSBC’s own Financial Intelligence Group (FIG).
According to the document, SIBL’s ownership stakes were held by two Saudi Arabia based non-governmental organizations (NGOs): the International Islamic Relief Organization (IIRO) - implicated in terrorist financing by the U.S. administration and included on the list of those prohibited to do business in the country; and Lajnat-al-Birr-al-Islam (Benevolence International Foundation, BIF), one of al Qaeda’s financers.
It was noted, further, that Saudi Arabia’s Al Rajhi Bank, also engaged in suspicious transaction, had a 37 per cent ownership in IBBL. HSBC also had maintained an association with Al Rajhi, a member of al Qaeda’s “Golden Chain” – a list including at least 20 top Saudi and Gulf States’ financial sponsors of al Qaeda, including bankers, businessmen, and former ministers.
The U.S. report on terror financing was not a recent finding. Since 9/11, the U.S. has taken strong steps to halt the flow of funds to terrorist organizations under Executive Order 13224 and related elements of the USA Patriotic Act.
The exposure of the unholy nexus between banking establishments and terrorist activities in Bangladesh can be traced back to the watershed country-wide serial bomb blasts on August 17, 2005. 459 explosions had been orchestrated in 63 of the country’s 64 Districts (excluding Munshiganj), killing three persons and injuring 100 others, on that date. After the serial blasts, which were orchestrated by the Jamaat ul-Mujahideen Bangladesh (JMB), the role of IBBL in promoting religious terror was brought under scrutiny, when Bangladesh Home Ministry constituted a committee to investigate terror financing. Subsequent to the arrest of the JMB ‘chief’ Shaikh Abdur Rahman and his second in command Siddiqui Islam alias Bangla Bhai, and the subsequent seizure of some banking documents, the investigation team documented suspicious transactions with IBBL branches in Sylhet, Gazipur and Savar, where violations of the Anti-Money Laundering Act were noticed. The Act which came into existence in 2002 was last amended on June 20, 2011. Rahman and Bangla Bhai were also found to have accounts with IBBL. The two were eventually hanged on March 30, 2007 – Rahman in Comilla Jail and Bangla Bhai in Mymensingh Prison.
IBBL was also found to be linked with the Kuwait based Islamic NGO, Revival of Islamic Heritage Society (RIHS), whose bank accounts in Pakistan were closed following 9/11. In Bangladesh, RIHS’s account with IBBL was closed in 2006, following revelations that, in November 2005, RIHS released BDT 20 million to facilitate suicide bombers in Bangladesh. Incidentally, Bangladesh experienced a suicide bombing on December 8, 2005, in Netrokona District, in which eight persons were killed and 46 were injured. In addition, two officials of RIHS, one from Sudan and the other from Yemen, were deported in 2006 for having channeled from Bangladesh over USD 700,000 to local and foreign terrorist organisations. Apart from the RIHS connection, linkages were also discovered to Yassin Qadi, a Saudi Arabian businessman and son-in-law of Sheikh Ahmed Salah Jamjoom, a foreign sponsor of IBBL. IBBL is also believed to have been closely tied to the August 17, 2005, serial bombings across Bangladesh.
Interestingly, Tarique Rahman, the son of Khaleda Zia (Chairperson of Bangladesh Nationalist Party, BNP and then Prime Minister), and the former vice-president of BNP, was also believed to be involved in suspicious money laundering operations. Reports indicate that Rahman and his associate Giasuddin al-Mamun, Managing Director of Channel-1 Television, were involved in money laundering, with Rahman linked forward to Dawood Ibrahim, the principal accused and fugitive in the March 12, 1993, serial blasts in Mumbai, India.
SIBL has purportedly been engaged in Shariah (Islamic Law) based banking in the country. Its Executive Vice President, Shawkat Ali, was apprehended by Kolkata (West Bengal, India) Police and was expelled from Kolkata in August 2006 for his involvement in undesirable and suspicious activities. SIBL is suspected to be engaged in routing funds to Kolkata, and from there to other destinations in India and abroad. SIBL’s principal patrons are known to be from the Middle East.
Investigation of the financial operations of terrorist groupings such as JMB and Harkat-ul-Jihad-al Islami Bangladesh (HuJI-B) discovered that a major chunk of their funding came from Pakistan through hawala (illegal money transaction) channels. Terrorist organizations also received regular funds from expatriate populations working in the US, Europe and Middle East. A pro-Pakistani Political party – Jamaat-e-Islami (JeI), Bangladesh, was found to be a frequent medium for foreign funding. Funds were reportedly transferred into JeI’s account with IBBL, and were then distributed to various terrorist outfits in the country. JeI was a coalition partner in Khaleda Zia’s Government.
Responding to growing international pressure after 9/11, the Bangladesh Government formed a central and regional taskforce on January 27, 2002, to deal with money laundering and terrorist finance. Subsequently, a Financial Intelligence Unit (FIU) was also established in Bangladesh Bank on May 16, 2007. A document titled National Strategy for Preventing Money Laundering and Combating Financing of Terrorism 2011-2013, outlines the Government’s present strategy to deal with the problem, and defines its mission, “To bring the anti-money laundering/combating of financing terror system and procedures of Bangladesh in full convergence with international best practice standards set by FATF and other multi-lateral forums”.
In November 2010, the National Coordination Committee, comprising all agencies dealing with anti-money laundering and finance related issues, was established. In addition, the Money Laundering Prevention Act (MLPA), 2012, was promulgated, repealing the Money Laundering Prevention Act, 2009. Similarly, the Anti Terrorism (Amendment) Act, 2012, has been promulgated, amending the Anti Terrorism Act, 2009, to meet international standards and to establish an effective regime in Bangladesh to deal with terror funding.
Unfortunately, as recent revelations, including those by the US Senate Subcommittee reiterate, such illegal activities continue in Bangladesh. Despite a sharp decline in Islamist terrorism related incidents and fatalities, Islamist extremist mobilization and radicalization continue in the country, and substantial flows of funds to groups connected with terrorist continues. Some linkages between Islamic Banking and terrorist organizations have now been brought into the open, but the networks have not been dismantled. In a country with a strong Islamist extremist constituency, and an intricate web of collusive relations with major political formations, as well as with significant financial organizations, potent clusters of a residual threat continue to exist. The Sheikh Hasina Government has taken dramatic steps to target and neutralize these subversive networks, with significant success. There is, however, a long struggle ahead before the threat is fully neutralized.