The 2.5% incentive on remittances has become a rare opportunity, leading to widespread corruption. Manipulating legal loopholes, some have long exploited this incentive, especially in the export of ICT products and services. Unscrupulous bank officials, in collusion with their foreign exchange houses, have been illegally accepting remittances, facilitating this fraudulent practice. As a result, the government is losing millions in revenue each year through schemes involving “wage earners” and “service remittances.” Evidence has surfaced of irregular remittance incentives being funneled through banks such as City Bank, Mutual Trust Bank, and mobile financial service provider bKash.
Investigations reveal that individuals are increasingly turning to bKash to receive their earnings in foreign currency, bypassing banks to avoid scrutiny over inbound dollars. Many have also resorted to cryptocurrency or informal “hundi” networks. This has led to a rise in scammers, especially those posing as freelancers. In fact, the number of these scammers reportedly outnumbers legitimate freelancers by a significant margin. Additionally, some IT companies, entitled to a 10% incentive for exporting products and services, are fraudulently claiming incentives without actually exporting.
It has been alleged that exchange houses, in collaboration with certain banks, have been fraudulently classifying “service remittances” as “wage earners’ remittances” to claim the 2.5% incentive, a significant portion of which is then laundered through illicit channels. This results in financial losses for the government. Concerned over this issue, IT experts have drawn the attention of economic advisor Dr. Salehuddin.
Zakaria Swapan, CEO of Priyo Pay and a global payment solutions expert, explained that Bangladesh primarily receives two types of remittances: “wage earners’ remittances” and “service remittances.” Wage earners’ remittances refer to funds sent by expatriates, who receive a 2.5% incentive from the government. Service remittances, on the other hand, are earned within Bangladesh by providing services to foreign clients, and are not eligible for government incentives. However, a group of exchange houses and banks have been fraudulently classifying service remittances as wage earners’ remittances to claim the additional 2.5% incentive. This practice has allowed a large sum of money to be laundered. The issue is not being conducted in secret; all relevant documents are submitted to the Bangladesh Bank. A proper audit of remittance records would reveal the truth, and we also have evidence to substantiate this ongoing malpractice.
To address this corruption, Swapan urged the Governor of Bangladesh Bank to investigate those involved in this fraudulent activity. He suggested that a simple directive could be issued to banks to stop this practice. Banks have the necessary software to distinguish between wage earners’ and service remittances, and any data manipulation could be easily detected.
Sources also indicate that Mutual Trust Bank has a remittance transfer agreement with foreign fintech company Wise. Several freelancers have reported that while they used to receive a 2.5% incentive when withdrawing their dollar earnings, this incentive is no longer provided. This has led at least 30% of freelancers to turn to illegal channels for receiving remittances.
To boost remittances through freelancing, the government had announced a combined 5% incentive, with banks providing 2.5% and the government adding another 2.5%. Freelancers were supposed to receive a 4% incentive, but complexities in the process have left many disillusioned with the system.
Abu Kahab Mohammad Nahid Hossain, a senior software engineer at Swedish company GroSocial Limited, shared his experiences. He stated that receiving his hourly-based salary in his remittance account involves numerous formalities, taking about two hours to complete. To avoid the hassle, he uses Wise to receive payments, but while bKash provides a 2.5% incentive, 1% is deducted during withdrawal. Additionally, withdrawal limits create further inconvenience, leaving him with only 1.5% of the incentive. Despite earning in dollars, freelancers are not truly benefiting from the system.
Many freelancers, due to the lack of PayPal, are now selling dollars via peer-to-peer (P2P) platforms at rates of BDT 125 per dollar or purchasing cryptocurrency, which they then sell to transfer funds into local currency.
Dr. Tanziba Rahman, President of the Bangladesh Freelancer Development Society (BFDS), expressed concerns that these complexities are hindering the legal flow of remittances. She emphasized that legitimate freelancers avoid illegal channels, but scammers are exploiting the system, outnumbering real freelancers by 100 to 1. They deal in online currency exchanges, gambling, or illegal content creation using foreign accounts. Meanwhile, freelancers face significant losses due to exchange rate discrepancies and taxation.
In response to the allegations of money laundering under the guise of remittances, the President of the Association of Bankers Bangladesh, Selim R. F. Hossain, declined to comment.