Thursday, 23 March, 2023

Remittance thru legal channel on the rise

Remittance thru legal channel on the rise

Following the increased use of financial intelligence, remitters are increasingly interested in sending money through formal channels instead of hundi.

Generally, Bangladeshi migrants are more interested in sending home money through hundi, which is operated by a group involved in illegal money transfer business with the help of mobile financial services (MFS). 

Bangladesh Financial Intelligence Unit (BFIU) detected some 6,000 such hundi agents and froze 5,557 MFS accounts of beneficiaries.

Later, BFIU resumed some 3,000 frozen accounts after the beneficiaries committed that they would not engage in illegal money transfers. Now, many of them send money through formal channels.

The number of workers migrating abroad has increased, but inward remittances decreased mainly because of hundi business.

Remittances increased in July and August when Bangladesh Bank set a fixed taka-US dollar exchange rate for remittances for all banks.

On average, Bangladesh received $2.07 billion in foreign remittances at a time when remitters were receiving Tk 110-Tk 114 per US dollar. But in the next four months up to December the average monthly receipt slipped to $1.59 billion as the exchange rate fell to Tk 107.

After BFIU’s intervention, monthly inward remittances rose again to $1.96 billion in January and it is expected to rise more in the coming months.

BFIU has so far sent a list of 5,766 dubious agents to CID, of whom licenses for 2,266 agents and three distributors were cancelled, according to official sources.

Besides, out of the 5,557 frozen MFS accounts, where Tk 2,32,47000 was deposited, 2953 accounts were reopened and money withdrawal has been withheld for 2,614 accounts, of which 800 MFS account holders have submitted written application to BFIU for opening their account.

The financial intel are also looking into whether money laundering is taking place through MFS accounts, which is resulting in remittances through the formal channel.

BFIU officials said when the demand for hundi rises, remittances sent through formal channels rise, which was observed during the Corona pandemic situation as demand for money laundering fell drastically at that time because most of the world economies came to a halt at the very outset of the pandemic.       In view of this, Bangladesh received a record $24.78 billion in remittances during the 2020-21 fiscal year even though people’s income fell globally at that time.

But money laundering increased again after the local economy started showing signs of improvement. As a result, remittances slipped 15.12 percent year-on-year to $21.03 in the 2021-22 fiscal year despite sending a record number of workers abroad.

Hundi business transactions are typically conducted through MFS. However, BFIUhas received reports of hundi activities that involve hard cash or bank transfers. Unlike formal banking services, there are no fees associated with hundi transactions. Currently, banks are offering an exchange rate of Tk 107 per dollar, while hundi operators are offering a rate of Tk 110-111 per dollar.